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uBisi Dairies (Pty) Ltd is a South African organic dairy processor based in Kw...
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uBisi Dairies (Pty) Ltd is a South African organic dairy processor based in KwaZulu-Natal. The company purchases raw organic milk from local farmers and processes the milk through a joint manufacturing process. Joint costs are allocated to the joint products using the physical measures method (litres).
uBisi uses the absorption costing system and values inventories using the FIFO method. uBisi has a 31 March financial year-end and budgeted to operate for 28 days during February 2026.
Production process
Raw milk is received, tested, chilled and pasteurised. During separation, the process yields three separately identifiable outputs at the split-off point:
- Full-Cream Milk (FCM)
- Low-Fat Milk (LFM)
- Cream (CRM) (incidental to the process)
Extract from the budget information for the month of February 2026
Details | Notes | Amount |
Joint Production cost |
|
|
· Raw Milk |
| R10,50 per litre |
· Direct Labour |
| R5,10 per litre |
· Production overheads |
| R2,90 per litre |
Further processing costs | 1.2 | ? |
Packaging costs | 1.3 | ? |
Selling Prices | 1.3 | ? |
Variable Selling costs | 1.3 | ? |
Additional information
1.1 The plant budgeted to process 80 000 litres of raw milk a day. The standard yield of the joint
process is that each litre of raw milk produces one litre of finished dairy product at the split-off point, distributed as follows:
· 55% Full cream milk (FCM)
· 40% Low-Fat Milk (LFM)
· 5% Cream (CRM)
1.2 After the split-off point, Full-Cream Milk and Low-Fat Milk require further processing. Full-Cream
Milk requires 4 machine minutes per litre, and Low-Fat Milk requires 3 machine minutes per litre. Machine processing costs amount to R140 per machine hour. Cream does not require any further processing.
1.3 Selling price and other costs
Detail | FCM R | LFM R | CRM R |
Budgeted selling price | 45,00 | 40,00 | 28,00 |
Packaging cost | 0,70 | 0,65 | 0,50 |
Variable selling and distribution | 1,20 | 1,10 | 1,80 |
In answering Question 17 only, assume that:
(i) the total budgeted joint costs allocated to the Low-Fat Milk (LFM) product were R16 000 000.
(ii) the budgeted yields in litres were 1 320 000; 960 000; and 120 000 for FCM; LFM; and CRM,
respectively; and
(iii) all other information remains as given.
The budgeted total gross profit of the Low-Fat Milk (LFM) product type (round the final answer to two decimal places) for March 2026 would be _______.
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