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Questions and Answers
What is the total cost of processed cream purchased by 'Buttery Butter' in January?
What is the total cost of processed cream purchased by 'Buttery Butter' in January?
What is the total quantity of Buttermilk produced by 'Buttery Butter' in January?
What is the total quantity of Buttermilk produced by 'Buttery Butter' in January?
What is the incremental cost of further processing 20 tonne of butter to produce Ghee?
What is the incremental cost of further processing 20 tonne of butter to produce Ghee?
What method would be used to apportion the joint cost between Buttermilk and Butter?
What method would be used to apportion the joint cost between Buttermilk and Butter?
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What is the selling price of Ghee per kilogram?
What is the selling price of Ghee per kilogram?
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Study Notes
Production Process
- ‘Buttery Butter’ produces Buttermilk, Butter, and Ghee by purchasing processed cream and churning it until it separates into Buttermilk and Butter.
January Production and Sales
- 50 Kilolitre of processed cream was purchased at ` 100 per 1000 ml in January.
- Conversion cost of ` 1,00,000 was incurred up to the split-off point, producing two saleable products: Buttermilk and Butter.
- Production and sales information for January:
- Buttermilk: 28 Kilolitre produced, 28 Kilolitre sold, selling price ` 30 per Litre
- Butter: 20 tonne produced, 0 tonne sold
- Ghee: 16 Kilolitre produced, 16 Kilolitre sold, selling price ` 480 per KG
Ghee Production
- 20 tonne of Butter was further processed at an incremental cost of ` 1,20,000 to yield 16 Kilolitre of Ghee.
Inventory
- There was no opening or closing inventory of Buttermilk, Butter, or Ghee in January.
Joint Cost Apportionment
- Joint cost would be apportioned between Buttermilk and Butter under the Estimated Net Realisable Value method.
Offer from Healthy Bones
- ‘Healthy Bones’ offers to purchase 20 tonne of Butter in February at ` 360 per kg.
- If accepted, no Ghee would be produced in February.
- Suggest whether ‘Buttery Butter’ should accept the offer, affecting its operating income, or further process Butter to make Ghee itself.
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Description
Learn about the cost accounting process in the production of buttermilk and butter. Calculate the costs incurred and the separation of products in the manufacturing process.
