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 $13,000. 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 Product Gallons Processing Cost per Gallon Eventual Market Price per Gallon $2.00 $0.50 L-Ten 3,600 1.00 5.00 Triol 4,000 1.50 6.00 Pioze 2,600 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 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. Product L-Ten Joint Cost Allocation $ Triol Pioze Total $ (Note: The joint cost allocation does not equal due to rounding.) 3. What if it cost $2.00 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. Joint Cost Product L-Ten Allocation $ Triol Pioze Total $ (Note: The joint cost allocation does not equal 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 $13,000. 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 Product Gallons Processing Cost per Gallon Eventual Market Price per Gallon $2.00 $0.50 L-Ten 3,600 1.00 5.00 Triol 4,000 1.50 6.00 Pioze 2,600 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 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. Product L-Ten Joint Cost Allocation $ Triol Pioze Total $ (Note: The joint cost allocation does not equal due to rounding.) 3. What if it cost $2.00 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. Joint Cost Product L-Ten Allocation $ Triol Pioze Total $ (Note: The joint cost allocation does not equal due to rounding.)
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Transcribed Image Text: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 $13,000. 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
Product Gallons
Processing
Cost per
Gallon
Eventual
Market
Price per
Gallon
$2.00
$0.50
L-Ten
3,600
1.00
5.00
Triol
4,000
1.50
6.00
Pioze
2,600
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
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.
Product
L-Ten
Joint Cost
Allocation
$
Triol
Pioze
Total
$
(Note: The joint cost allocation does not equal due to rounding.)
3. What if it cost $2.00 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.
Joint Cost
Product
L-Ten
Allocation
$
Triol
Pioze
Total
$
(Note: The joint cost allocation does not equal due to rounding.)
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