Question: Bill Dundee is the owner and operator of Western Bottling

Bill Dundee is the owner and operator of Western Bottling, a bulk soft-drink producer. A single production process yields two bulk soft drinks, Rainbow Dew (the main product) and Resi-Dew (the byproduct). Both products are fully processed at the splitoff point, and there are no separable costs.
Summary data for September 2013 are as follows:
◆ Cost of soft-drink operations  $144,000
◆ Production and sales data:
There were no beginning inventories on September 1, 2013. The following is an overview of operations:
1. What is the gross margin for Western Bottling under methods A and B of byproduct accounting?
2. What are the inventory amounts reported in the balance sheet on September 30, 2010, for Rainbow Dew and Resi-Dew under each of the two methods of byproduct accounting cited in requirement 1?
3. Which method would you recommend Western Bottling use? Explain.

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