Yum, Inc. is a producer of potato chips. A single production process atYum, Inc., yields potato chips as the main product, as well as a byproduct that can be sold as a snack. Both products are fully processed by the splitoff point, and there are no separable costs. For September 2020, the cost of operations is $485,000. Production and sales data are as follows: Note: There were no beginning inventories on September 1, 2020. RequirementsDialog content starts1.What is the gross margin forbYum,Inc., under the production method and the sales method of byproduct accounting?2.What are the inventory costs reported in the balance sheet on September 30, 2020, for the main product and byproduct under the two methods of byproduct accounting in requirement 1?3.Prepare the journal entries to record the byproduct activities under (a) the production method and (b) the sales method. Briefly discuss the effects on the financial statements. **Gross Margin Calculation for Yum, Inc.****Requirement 1:** Determine the gross margin for Yum, Inc. using the production method.**Steps for Calculation:**1. **Revenues:** - **Main product (potato chips):** Initially assigned a value of 1. - **Byproduct (snack):** Requires input for its revenue value. - **Total revenues:** Sum of main product and byproduct revenues.2. **Cost of Goods Sold:** - **Total manufacturing costs:** Aggregate costs associated with production. - **Deduct value of byproduct production:** Subtract revenue from byproduct to find costs specifically associated with the main product. - **Net manufacturing costs:** Result after deduction. - **Deduct main product inventory:** Subtract the value of inventory of the main product. - **Cost of goods sold:** Final calculated cost of goods after deductions.3. **Gross Margin:** - **Gross margin:** Calculated by subtracting the cost of goods sold from total revenues.**Note:** Enter values where necessary to complete the calculation. **Data Table**| | Production (in pounds) | Sales (in pounds) | Selling Price per pound ($) ||---------------------|------------------------|-------------------|----------------------------|| Potato Chips | 48,000 | 39,360 | 20 || Byproduct | 8,700 | 8,000 | 10 |**Explanation:**This table provides data related to the production and sales of potato chips and their byproduct. The table includes three columns:1. **Production (in pounds):** Indicates the total weight of production for each item. - Potato Chips: 48,000 pounds - Byproduct: 8,700 pounds2. **Sales (in pounds):** Represents the weight of the products sold. - Potato Chips: 39,360 pounds - Byproduct: 8,000 pounds3. **Selling Price per Pound ($):** Lists the selling price for each pound of product. - Potato Chips: $20 per pound - Byproduct: $10 per poundThis information is essential for understanding production, sales performance, and pricing strategy.

Cost of goods sold Calculation of cost of goods sold is important which is determine the cost of…

Answered: Yum, Inc. is a producer of potato…

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

See similar textbooks

Related questions

Concept explainers

Question

Yum, Inc. is a producer of potato chips. A single production process at

Yum, Inc., yields potato chips as the main product, as well as a byproduct that can be sold as a snack. Both products are fully processed by the splitoff point, and there are no separable costs. For September 2020, the cost of operations is $485,000. Production and sales data are as follows:

Note: There were no beginning inventories on September 1, 2020.

Requirements

Dialog content starts

1.	What is the gross margin forbYum,Inc., under the production method and the sales method of byproduct accounting?
2.	What are the inventory costs reported in the balance sheet on September 30, 2020, for the main product and byproduct under the two methods of byproduct accounting in requirement 1?
3.	Prepare the journal entries to record the byproduct activities under (a) the production method and (b) the sales method. Briefly discuss the effects on the financial statements.

**Gross Margin Calculation for Yum, Inc.**

**Requirement 1:**

Determine the gross margin for Yum, Inc. using the production method.

**Steps for Calculation:**

1. **Revenues:**
- **Main product (potato chips):** Initially assigned a value of 1.
- **Byproduct (snack):** Requires input for its revenue value.
- **Total revenues:** Sum of main product and byproduct revenues.

2. **Cost of Goods Sold:**
- **Total manufacturing costs:** Aggregate costs associated with production.
- **Deduct value of byproduct production:** Subtract revenue from byproduct to find costs specifically associated with the main product.
- **Net manufacturing costs:** Result after deduction.
- **Deduct main product inventory:** Subtract the value of inventory of the main product.
- **Cost of goods sold:** Final calculated cost of goods after deductions.

3. **Gross Margin:**
- **Gross margin:** Calculated by subtracting the cost of goods sold from total revenues.

**Note:** Enter values where necessary to complete the calculation.

**Data Table**

| | Production (in pounds) | Sales (in pounds) | Selling Price per pound ($) |
|---------------------|------------------------|-------------------|----------------------------|
| Potato Chips | 48,000 | 39,360 | 20 |
| Byproduct | 8,700 | 8,000 | 10 |

**Explanation:**

This table provides data related to the production and sales of potato chips and their byproduct. The table includes three columns:

1. **Production (in pounds):** Indicates the total weight of production for each item.
- Potato Chips: 48,000 pounds
- Byproduct: 8,700 pounds

2. **Sales (in pounds):** Represents the weight of the products sold.
- Potato Chips: 39,360 pounds
- Byproduct: 8,000 pounds

3. **Selling Price per Pound ($):** Lists the selling price for each pound of product.
- Potato Chips: $20 per pound
- Byproduct: $10 per pound

This information is essential for understanding production, sales performance, and pricing strategy.

Definition Definition Financial statement that provides a snapshot of an organization's financial position at a specific point in time. It summarizes a company's assets, liabilities, and shareholder's equity, detailing what the company owns, what it owes, and what is left over for its owners. The balance sheet serves as a crucial tool to assess the financial health and stability of a company, as well as to help management make informed decisions about its future investments and financial obligations.

Expert Solution

Trending now

This is a popular solution!

Step by step

Solved in 4 steps

SEE SOLUTION Check out a sample Q&A here

Knowledge Booster

Learn more about

Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, accounting and related others by exploring similar questions and additional content below.