I need a correct answer for question 2 and 3 please !!! this is the 3rd time I p
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I need a correct answer for question 2 and 3 please !!! this is the 3rd time I post it!!
Cornerstone Exercise 7.11
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:
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.
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.
(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.
(Note: The joint cost allocation does not equal $12,900 due to rounding.)
Total Revenue $ Total Costs $ Total Gross Profit $Explanation / Answer
1. Total revenue = total gallons*market price per gallon for each product type.
Total costs = joint costs+further processing costs. Joint cost = $12,900. Total further processing cost = gallons*cost per gallon for different products
= 3500*0.5 + 4000*1 + 2500*1.5 = 9500. Total costs = 12900+9500 = 22,400.
2. constant gross margin % = gross profit/total revenue (as calculated in 1 above) = 19600/42000 = 46.6667%. Now sales of L-ten = 3500*2 = $7,000. Using a gross margin ratio of 46.6667%, gross margin will be = 46.6667% * 7,000 = 3,266.67. Total production cost = revenue - gross margin = 7,000-3266.67 = $3733.33. Of this seperable costs = further processing cost = 3500*0.5 = 1750. Thus joint cost = total cost - seperable cost = 3733.33 - 1750 = 1983.33. The same process will be used for other products as well.
Total = 1983+6667+4250 = $12,900
3. Assuming $2 as seperable cost per gallon for Triol:
Total seperable cost = 3500*0.5 + 4000*2 + 2500*1.5 = 13500. Total costs = 12900+13500 = $26,400
Gross margin % = 15600/42000 = 37.1429%
Total joint costs = 2650+4571+5679 = 12,900
Product Gallons Price per gallon Revenue L Ten 3,500 2 7,000 Triol 4,000 5 20,000 Pioze 2,500 6 15,000 Total 42,000Related Questions
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