Ch 7 1. BEX.07.01.ALGO eBook Learning Objective 5 Instant Gross Margin Method A company manufactures three products, L-Ten, Triol, and Pioze, from a joint process. Each production run costs $12,700. 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: 2. BEX.07.02.ALGO 3. BEX.07.03.ALGO Further Processing Product Gallons Cost per Gallon Eventual Market Price per Gallon 4. BEX.07.04.ALGO L-Ten 3,700 $0.50 $2.00 5. BEX.07.05.ALGO Triol 4,000 1.00 5.00 6. BEX.07.07.ALGO Pioze 2,300 1.50 6.00 7. BEX.07.08.ALGO 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. 8. BEX.07.09.ALGO 9. BEX.07.10.ALGO 10. BEX.07.11.ALGO Total Revenue Total Costs $ 41,200 ✔ $ 22,000 ✓ - 19,200 ✓ 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 Triol Joint Cost Allocation 2,102 v 6,680 Pioze Total 3,919 ✔ $ 12,701 ✔ (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 Allocation Product L-Ten Triol Pioze Total $ 880 X 620 x 1,642.2 x ક (Note: The joint cost allocation does not equal due to rounding.) Feedback ▼ Check My Work 1. The constant gross margin percentage method used to avoid assuming that all profit occurs at the split-off point. allocates joint cost to ensure that the same gross profit is applicable to all products. 2. Remember that the gross margin percentage is a function of revenues. 3. To show what would happen if the cost changed, see Example 7.11. Check My Work Progress: 10/10 items