Go-Go Co., which began operations in 2013, produces gasoline and a gasoline by-product. Go-Go accounts for the by-product at the time of production through a reduction in joint product cost of goods sold. The following information is available pertaining to 2013 sales and production:
Total production costs to split-off point ..... $ 240,000
Gasoline sales ............... 540,000
By-product sales .............. 60,000
Gasoline inventory, 12/31/2013 ........ 30,000
Additional by- product costs:
Marketing ................. $ 20,000
Production ................ 30,000
a. Compute Go-Go’s cost of sales for gasoline and for the by- product for 2013.
b. If Go-Go had used the by- product’s NRV to reduce the joint cost of the gasoline, how (if at all) would the gross margin for 2013 changed? No calculations are necessary.