A chemical process product produces two main products (Delta and Echo) and one by-product (Golf) from a

Question:

A chemical process product produces two main products (Delta and Echo) and one by-product (Golf) from a joint product (Beta). None of the products require processing after the split-off point. Information for last month’s operations follows:

Joint costs of production...............................$15,000

Delta production (grams)................................15,000

Price per 10 gram package...............................$3.00

Sales last month (grams)................................13,500

Echo production (litres)...................................10,000

Price per 4 L bottle............................................$5.50

Sales last month (4 L bottles)............................2,250

Golf production (grams).....................................1,500

Sales last month (grams)...................................1,250

Golf revenue.......................................................$125

Required:

A. What is the gross margin for last month if the by-product value is recognized at the time of production?

B. What is the gross margin for last month if the by-product value is recognized at the time of sale?

C. Calculate the inventory value for Delta, Echo, and Golf on the balance sheet under the methods used in Parts A and B.

D. Research and Development has suggested that Delta can be processed further into high-quality Indigo. The additional processing will cost $1.50 per 10 grams and there will be a 10% loss in the processing (i.e., 100 grams of Delta will yield 90 grams of Indigo). Indigo sells for $6.00 per 10 gram package. Should Delta be processed further?

Balance Sheet
Balance sheet is a statement of the financial position of a business that list all the assets, liabilities, and owner’s equity and shareholder’s equity at a particular point of time. A balance sheet is also called as a “statement of financial...