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# A2 - 9.36 Relative Sales Value at Split-Off and Constant...

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9.36 Relative Sales Value at Split-Off and Constant Gross Margin Percentage Methods (1) Relative sales value at split-off method Product X Product Y Product Z Total Sales value at split-off \$80,000 \$70,000 \$50,000 \$200,000 % of total sales value at split-off* 40% 35% 25% 100% Joint cost allocations** \$32,00 0 \$28,000 \$20,000 \$80,000 * Percentage equals product’s sales value at split-off divided by total sales value at split-off (e.g., for product X, 40% = \$80,000 / \$200,000) ** Joint cost allocation equals % of total sales value at split-off times total joint costs (e.g., for product X, \$32,000 = 40% x \$80,000) (2) Constant gross margin percentage method Product X Product Y Product Z Total Sales value \$110,000 \$90,000 \$50,000 \$250,000 Joint cost allocations (step 3) 31,280 26,320 22,400 80,000 Additional processing costs 18,000 14,000 0 32,000 Gross margin (step 2) \$60,720 \$49,680 \$27,600 \$138,000 Gross margin % (step 1) 55.20% 55.20% 55.20% 55.20% In part (2), an embedded decision is the process or sell decision. Depending on the process or sell decision, gross margin is different. In this case, Product X, Y are processed further while Product Z is sold at split-off. Check if you reach the same decision for each product. 9.38 By-products

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Method 1 Method 2 Sales revenue ..................................... \$140,00 0 \$140,0 00 Other income ...................................... 450 -0- Total revenue ..................................... \$140,45 0 \$140,0 00 Cost of goods sold: Unadjusted ....................................... 72,000 72,000 Less: By-product net realizable value. (450) Adjusted cost of goods sold ................. \$72,000 \$71,55 0 Gross margin ...................................... \$68,450 \$68,45 0 9.46 NRV method and effects of further processing The answers to requirements a, b, and c follow the spreadsheet. A description of the information in the spreadsheet is as follows: A B C D E F G 1 Products X Y Z 2 Pounds sold 40,000 118,000 140,000 3
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A2 - 9.36 Relative Sales Value at Split-Off and Constant...

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