Mac3761 test 2 2025 solutions
, Division Mokoena: Product Classification
(a) Product classification:
1. *ACE (Acetic acid solution)*: Joint product, as it has a significant sales value and is
produced simultaneously with other products.
2. *BIC (Biochar)*: Joint product, as it has a significant sales value and is produced
simultaneously with other products.
3. *FUL (Fuel)*: Joint product, as it has a significant sales value, is produced
simultaneously with other products, and has a substantial proportion of total sales.
4. *ASH (Ash material)*: By-product, as it has no sales value and is discarded at a cost.
Inappropriateness of Physical Measures Method
(b) The physical measures method would be inappropriate because the products have
different units of measurement (kilograms and liters) and different sales values, making it
difficult to allocate joint costs fairly.
Conceptual and Principle Errors
(c) Errors in Table A:
1. *Incorrect allocation base*: Joint costs allocated based on total production units instead
of net realizable value (NRV).
2. *Waste discarding costs*: ASH's disposal costs should be considered in joint cost
allocation or treated separately.
3. *Selling costs allocation*: Fixed selling costs allocated based on external sales units
may not accurately reflect the actual selling costs incurred.
4. *Internal sales*: Internal sales of FUL to Division Mofokeng should be considered when
allocating joint costs.
5. *Contribution margin calculation*: Contribution margin should be calculated before
allocating fixed selling costs.
, Division Mokoena: Product Classification
(a) Product classification:
1. *ACE (Acetic acid solution)*: Joint product, as it has a significant sales value and is
produced simultaneously with other products.
2. *BIC (Biochar)*: Joint product, as it has a significant sales value and is produced
simultaneously with other products.
3. *FUL (Fuel)*: Joint product, as it has a significant sales value, is produced
simultaneously with other products, and has a substantial proportion of total sales.
4. *ASH (Ash material)*: By-product, as it has no sales value and is discarded at a cost.
Inappropriateness of Physical Measures Method
(b) The physical measures method would be inappropriate because the products have
different units of measurement (kilograms and liters) and different sales values, making it
difficult to allocate joint costs fairly.
Conceptual and Principle Errors
(c) Errors in Table A:
1. *Incorrect allocation base*: Joint costs allocated based on total production units instead
of net realizable value (NRV).
2. *Waste discarding costs*: ASH's disposal costs should be considered in joint cost
allocation or treated separately.
3. *Selling costs allocation*: Fixed selling costs allocated based on external sales units
may not accurately reflect the actual selling costs incurred.
4. *Internal sales*: Internal sales of FUL to Division Mofokeng should be considered when
allocating joint costs.
5. *Contribution margin calculation*: Contribution margin should be calculated before
allocating fixed selling costs.
