MAC3701 ASSIGNMENT 2
Part A(a)
Output Quantities
Product Yield per Coconut Total Coconuts Output
VCO 0.35 L 220,000 77,000 L
FCWater 0.45 L 220,000 99,000 L
Husk 0.5 kg 220,000 110,000 kg
Joint Production Costs
Cost Component Calculation Amount (R)
Raw materials 220,000 × 18 3,960,000
Labour 0.22 hr × 90 × 220,000 4,356,000
VMO 440 batches × 440 193,600
FMO Given 150,000
Total joint cost 8,659,600
Less: Husk NRV (5 – 1.20) × 110,000 (418,000)
Net joint cost allocated 8,241,600
Joint Cost Allocation
Product Litres % of Total Cost Allocated (R)
VCO 77,000 43.75% 3,602,700
FCWater 99,000 56.25% 4,638,900
Total 176,000 100% 8,241,600
Further Processing Costs
Description Calculation Cost (R)
Additional purification 99,000 L × 12 1,188,000
Distribution Costs
Product Litres Sold Calculation Cost (R)
VCO 77,000 0.75×77,000 + 75,750
18,000
FCWater 99,000 0.75×99,000 + 92,250
18,000
Total 168,000
Administrative Costs
Product Share % Cost (R)
VCO 43.75% 109,375
FCWater 56.25% 140,625
, Total 100% 250,000
Income Statement
Item VCO (R) FCWater (R) Total (R)
Revenue 9,240,000 6,930,000 16,170,000
Joint cost allocated (3,602,700) (4,638,900) (8,241,600)
Further processing - (1,188,000) (1,188,000)
Gross Profit 5,637,300 1,103,100 6,740,400
Distribution costs (75,750) (92,250) (168,000)
Administrative costs (109,375) (140,625) (250,000)
Operating Profit 5,452,175 870,225 6,322,400
Part A(b) – Business and Social Risks
1. Employee Welfare Risks – Workers in the labour‑intensive de‑husking process reported
muscle strain and injuries. CNC refusing to cover medical expenses may lead to labour
disputes, strikes, and reputational damage.
2. Sustainability and Environmental Risks– Increased pesticide use by farmers has resulted
in coconuts that fail sustainability standards, threatening CNC’s commitments and
compliance with European environmental expectations.
3. Supply Chain Instability – Small‑scale farmers are dissatisfied with compensation during
shortages, causing the loss of high‑quality suppliers and disrupting raw material
availability.
4. Market and Certification Risks– European buyers now require formal sustainability and
ethical‑sourcing certification. Failure to comply may lead to loss of export markets and
reduced revenue.
Part B ( a)
MEMORANDUM – Recommended Selling Price for Probiotic VCO
To: Management, CocoPure Division (CPD)
From: Senior Management Accountant
Date: April 2026
Subject: Recommended Selling Price for Probiotic Virgin Coconut Oil (VCO)
The purpose of this memorandum is to recommend a selling price per 1-litre bottle of
Probiotic VCO using relevant costing and CNC’s 30% mark-up policy.
Relevant Costing Summary
• Virgin Coconut Oil (VCO): R2,100,000
• Glass bottles: R175,000
• Probiotic culture (market replacement cost): R40,000
• Input Z stabiliser packs: R175,000
Part A(a)
Output Quantities
Product Yield per Coconut Total Coconuts Output
VCO 0.35 L 220,000 77,000 L
FCWater 0.45 L 220,000 99,000 L
Husk 0.5 kg 220,000 110,000 kg
Joint Production Costs
Cost Component Calculation Amount (R)
Raw materials 220,000 × 18 3,960,000
Labour 0.22 hr × 90 × 220,000 4,356,000
VMO 440 batches × 440 193,600
FMO Given 150,000
Total joint cost 8,659,600
Less: Husk NRV (5 – 1.20) × 110,000 (418,000)
Net joint cost allocated 8,241,600
Joint Cost Allocation
Product Litres % of Total Cost Allocated (R)
VCO 77,000 43.75% 3,602,700
FCWater 99,000 56.25% 4,638,900
Total 176,000 100% 8,241,600
Further Processing Costs
Description Calculation Cost (R)
Additional purification 99,000 L × 12 1,188,000
Distribution Costs
Product Litres Sold Calculation Cost (R)
VCO 77,000 0.75×77,000 + 75,750
18,000
FCWater 99,000 0.75×99,000 + 92,250
18,000
Total 168,000
Administrative Costs
Product Share % Cost (R)
VCO 43.75% 109,375
FCWater 56.25% 140,625
, Total 100% 250,000
Income Statement
Item VCO (R) FCWater (R) Total (R)
Revenue 9,240,000 6,930,000 16,170,000
Joint cost allocated (3,602,700) (4,638,900) (8,241,600)
Further processing - (1,188,000) (1,188,000)
Gross Profit 5,637,300 1,103,100 6,740,400
Distribution costs (75,750) (92,250) (168,000)
Administrative costs (109,375) (140,625) (250,000)
Operating Profit 5,452,175 870,225 6,322,400
Part A(b) – Business and Social Risks
1. Employee Welfare Risks – Workers in the labour‑intensive de‑husking process reported
muscle strain and injuries. CNC refusing to cover medical expenses may lead to labour
disputes, strikes, and reputational damage.
2. Sustainability and Environmental Risks– Increased pesticide use by farmers has resulted
in coconuts that fail sustainability standards, threatening CNC’s commitments and
compliance with European environmental expectations.
3. Supply Chain Instability – Small‑scale farmers are dissatisfied with compensation during
shortages, causing the loss of high‑quality suppliers and disrupting raw material
availability.
4. Market and Certification Risks– European buyers now require formal sustainability and
ethical‑sourcing certification. Failure to comply may lead to loss of export markets and
reduced revenue.
Part B ( a)
MEMORANDUM – Recommended Selling Price for Probiotic VCO
To: Management, CocoPure Division (CPD)
From: Senior Management Accountant
Date: April 2026
Subject: Recommended Selling Price for Probiotic Virgin Coconut Oil (VCO)
The purpose of this memorandum is to recommend a selling price per 1-litre bottle of
Probiotic VCO using relevant costing and CNC’s 30% mark-up policy.
Relevant Costing Summary
• Virgin Coconut Oil (VCO): R2,100,000
• Glass bottles: R175,000
• Probiotic culture (market replacement cost): R40,000
• Input Z stabiliser packs: R175,000
