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Create a spreadsheet to solve the following joint cost problem. Joint cost allocation: additional processing beyond split-off Point ABC Company produces three joint products: A, B and C. The material is added at the beginning of the process. At the end of Process 1, the split-off point, the three intermediate products enter three separate further processes. Product A enters Process 2, Product B enters Process 3 and Product C enters Process 4. None of the products can be sold unless the subsequent processing is carried out. The following information relates to the month of June:
- Direct material issued to Process 1, $26 000.
- Conversion costs incurred: Labour Overhead Process 1 $10 000 $14 000 Process 2 3 000 2 000 Process 3 1 000 1 000 Process 4 600 400
- There was no work in process at the beginning or end of the month, and no finished goods inventories at the beginning of the month.
- A. Solve using a spreadsheet. See the requirements embedded in the spreadsheet. Include the IF function to determine Favourable and Unfavourable variances.
- Prepare a Business Report as if for senior management:
- Critically evaluate the purpose of variance analysis,
- Explain why the materials price variance should be calculated on purchase,
- Identify other areas in an organization where variance analysis would be useful and
- Evaluate the practical relevance of detailed overhead variance analysis.
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