Allocating Joint Costs Using the Constant Gross Margin Method A company manufactures three products, L-Ten, Triol,...
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Allocating Joint Costs Using the Constant Gross Margin Method A company manufactures three products, L-Ten, Triol, and Pioze, from a joint process. Each production run costs $12,900. None of the products can be sold at split-off, but must be processed further. Information on one batch of the three products is as follows: Further Processing Eventual Market Product Gallons Cost per Gallon Price per Gallon L-Ten 3,500 $0.50 $2.00 Triol 4,000 1.00 5.00 Pioze 2,500 1.50 6.00 Required: 1. Calculate the total revenue, total costs, and total gross profit the company will earn on the sale of L-Ten, Triol, and Pioze. Total Revenue Total Costs Total Gross Profit 42,000 22,400 19,600 2. Allocate the joint cost to L-Ten, Triol, and Pioze using the constant gross margin percentage method. Round the gross margin percentage to four decimal places and round all other computations to the nearest dollar. Joint Cost Product L-Ten Allocation 1,983 Triol 6,667 X Pioze Total 4,250 X $ 12,900 X (Note: The joint cost allocation does not equal $12,900 due to rounding.) 3. What if it cost $2 to process each gallon of Triol beyond the split-off point? How would that affect the allocation of joint cost to these three products? Round the gross margin percentage to four decimal places and round all other computations to the nearest dollar. Product L-Ten Triol Pioze Total Joint Cost Allocation 2,650 4,751 X 5,679 12,900 X (Note: The joint cost allocation does not equal $12,900 due to rounding.) Allocating Joint Costs Using the Constant Gross Margin Method A company manufactures three products, L-Ten, Triol, and Pioze, from a joint process. Each production run costs $12,900. None of the products can be sold at split-off, but must be processed further. Information on one batch of the three products is as follows: Further Processing Eventual Market Product Gallons Cost per Gallon Price per Gallon L-Ten 3,500 $0.50 $2.00 Triol 4,000 1.00 5.00 Pioze 2,500 1.50 6.00 Required: 1. Calculate the total revenue, total costs, and total gross profit the company will earn on the sale of L-Ten, Triol, and Pioze. Total Revenue Total Costs Total Gross Profit 42,000 22,400 19,600 2. Allocate the joint cost to L-Ten, Triol, and Pioze using the constant gross margin percentage method. Round the gross margin percentage to four decimal places and round all other computations to the nearest dollar. Joint Cost Product L-Ten Allocation 1,983 Triol 6,667 X Pioze Total 4,250 X $ 12,900 X (Note: The joint cost allocation does not equal $12,900 due to rounding.) 3. What if it cost $2 to process each gallon of Triol beyond the split-off point? How would that affect the allocation of joint cost to these three products? Round the gross margin percentage to four decimal places and round all other computations to the nearest dollar. Product L-Ten Triol Pioze Total Joint Cost Allocation 2,650 4,751 X 5,679 12,900 X (Note: The joint cost allocation does not equal $12,900 due to rounding.)
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Related Book For
Cornerstones of Cost Management
ISBN: 978-1285751788
3rd edition
Authors: Don R. Hansen, Maryanne M. Mowen
Posted Date:
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