Cosmo Beauty Ltd is a company based in Umhlanga but has its operational plant situated...
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Cosmo Beauty Ltd is a company based in Umhlanga but has its operational plant situated in Johannesburg which manufactures three different cosmetic products namely, Cosmo Beauty A, B and C respectively. Cosmo Beauty A and B are main products while Cosmo Beauty C is a by-product. Past experience has indicated that the companys output is made up as follows: Cosmo Beauty A 60 % Cosmo Beauty B 35 % Cosmo Beauty C 5 % The net proceeds of the by-product is used to reduce the joint production costs. Joint production costs during August 2022 were R4 372 000 for an output of 1 520 000 kg. Further processing cost for the products are as follows, Cosmo Beauty A, Cosmo Beauty B and By-product Cosmo Beauty C is R920 000, R1 400 000 and R116 000 respectively. The selling price for Cosmo Beauty A and B is R32 per kg and R24 per kg respectively and By-product Cosmo Beauty C is R8 per kg. The company uses the physical unit method to allocate the joint costs to the joint products. The financial director of the company wants you as the cost accountant to allocate the joints costs to the different products after reducing the proceeds from the by product. Required: What is the net realisable value of the by product Cosmo Beauty C?
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