(a) Angus Menzies and Company is investigating the possibility of using a standard costing system for the process. The standards are to be based on the following information:

The joint process optimally requires equal quantities of A and B. The normal output from an input of 500 litres of A and 500 litres of B is:

The production manager considers that 1000 litres of good output should take one hour to process. The costing department gives the processing costs as £1,240 per hour.
On the basis of this information and retaining the physical units basis for the apportionment of joint costs, you are required to calculate the standard cost of 1000 litres of C and 1000 litres of D.

(b) Write a short report to the management of Angus Menzies and Company explaining the usefulness of standard costing and any special considerations and limitations that should be noted when considering its introduction for the process described in part

(a) of this question.

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500 litres of C, 250 litres of D and 250 litres of waste. The waste has a saleable value of 5p per litre. The purchasing department considers that the normal raw material prices are: 0.66 per litre for A and 0.33 per litre for B.