Question

Johnston Adhesives Company makes three widely used industrial adhesives: A101, A204, and B216. Sales and production information for each of the three adhesives are shown in the following table. Most of Johnston's customers ask for a special blend of the three products, which improves heat-resistance. The additional separable processing requires additional time and materials, and the price is increased accordingly, as shown in the table. Assume that Johnston produces only for specific customer orders, so there is no beginning or ending inventory. Assume also that all of Johnston's customers requested the heat-resistant version of the products so that all production required additional separable processing. Total joint cost for the three products is $3,053,000. A101 180,000 11 $ Gallons sold Final sales price per gallon Price at split-off Separable processing cost A204 148,000 $ 10 5 $ 137,000 B216 122,000 $ 10 6 $ 553,000 $ 444,000 Required: 1. Calculate the unit product cost and total gross margin for each of the three product lines using the following methods: (a)physical measure method, (b) sales value at split-off method, (c) the net realizable value method, and (d) the constant gross margin percentage method. (Round intermediate calculations and cost per unit answers to 4 decimal places. Round your final answers to whole dollar amounts. Negative amounts should be indicated with a minus sign.) A101 A204 B216 a. Physical Measure Method Cost per unit Total gross margin b. Sales Value at Split-Off Method Cost per unit Total gross margin c. Net Realizable Value Method Cost per unit Total gross margin d. Constant Gross Margin Method Cost per unit Total gross margin

Answer 1

A101 A204 B216 REFERENCE 180000 148000 10 122000A 10 B 11 8 5 61C Units Sold (Produced) Final Sale Price Price at Split Off Seperable Processing Cost Sales Value at Split off Final Sales Value 137000 444000 1440000 740000 553000 D 732000 D1 1220000 D2 1980000 1480000 PHYSICAL MEASURE METHOD Share of Joint Cost TOTAL Cost 1221200 1004098 827702 E.(3053000 allocated in ratio of A) 1665200 1141097.778 1380702.222 F Cost / Unit Total Gross Margin Total Gross Margin% 9.25 314800 16% 7.71 338902 23% 11.32 G = F/A -160702 H = D2-F - 13% 1509725 SALES OF VALUE AT SPLIT OFF Share of Joint Cost Total Cost Cost / Unit Total Gross Margin Total Gross Margin% 1953725 10.85 26275 1% 775831.044 767444 | (in ratio of D1) 912831.044 1320443.681 ) = I+D 6.171 10.82 K = J/A 567169 -100444 L = D2-) 38% -8% 1536000 1343000 1156283 1322450 NET REALIZABLE VALUE METHOD Final Sale Value-Further process cost Share of Joint Cost TOTAL COST Unit Cost Total Gross Margin Total Gross Margin% 1766450 1293283 667000 M = D2-D 574267 N (in ratio of M) 1127267 0 = N+D 9.24 N=0/A 92733 P = D2-N 8% Q = P/D2 9.81 8.74 186717 213550 11% 13% TOTAL 1220000 4680000 -3053000 553000 -1134000 493000 11% CONSTANT GROSS MARGIN METHOD - WORKING Sales Value 1980000 1480000 Joint Cost Further Seperable Costs 444000 137000 Margin Margin % CONSTANT GROSS MARGIN METHOD Sales Vale 1980000 1480000 Less: 11% Margin 208577 155906 Cost 1771423 1324094 Seperable Cost -444000 -137000 Share of Joint Cost 1327423 1187094.017 Unit Cost 9.84) 8.95 1220000 R 128517 1091483|S -553000 538483 8.95 T = S/A