Georgette Rheingold owns and operates a fruit smoothie manufacturing operation, Nutri-smoothie. She processes fruit and adds it to yogurt to produce fruit smoothies, the main product. She sells the rinds and other waste to a recycling organization that turns the waste into compost. Neither product requires processing after the split-off point. Information for last month’s operations follows:

Joint costs of smoothie production....................................$12,000

Smoothie production (in ½ L bottles)...................................20,000

Price per bottle............................................................................$2

Sales last month (bottles).....................................................18,000

Compost production............................................................10,000 kg

Compost sales.......................................................................8,000 kg

Compost revenue................................................................$2,000

Required:

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

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

C. Calculate the inventory value for both smoothies and compost on the balance sheet under the methods used in Parts A and B.