Question

Please explain how to calculate deduct main product inventory and complete the spaces below.

River Resources, Inc., mines copper. Its smelting process also yields a byproduct, molybdenum, that can be sold for industrial use. Both products are sold at the splitoff point. River Resources started November 2017 with no inventories and spent $560,000 on operations that month. Production and sales information for November are given below: (Click the icon to view the information for November.) What is the gross margin for River Resources, Inc., under the production method and the sales method of accounting for byproducts? Begin by calculating the gross margin under the production method and then the sales method. (Enter a "0" for any cells with a zero balance. For the main product inventory: Calculate the proportion of inventory first, then complete your calculation. Enter all numbers in thousands of dollars.) Production method i X Х Revenues More Info Main product $ 1,008,000 0 Byproduct Total revenues 1,008,000 Copper Production (in tons) Sales (in tons) Selling Price per ton 40,000 28,800 $ 35 4,200 3,350 $ 13 Molybdenum Cost of goods sold Total manufacturing costs Deduct value of byproduct production Net manufacturing costs 560,000 54,600 505,400 Print Done Deduct main product inventory Cost of goods sold Gross margin

Answer 1

calculation of gross margin of river resources inc. using production and sales method :

income statement
particular		production method		sales method
revenue :
copper (28800 units x $35)		$1008000		$1008000
molybdenm (3350 units x $13)				$43550
total revenue (a)		$1008000		$1051550
cost of goods sold :
total manufacturing cost	$560000		$560000
less : by product NRV	-$54600
net cost (b)	$505400		$560000
unit cost (net cost/production)	$505400/40000 = $12.635		$560000/40000 = $14
ending inventory (c)	11200 x $12.635 = $141512		11200 x $14 = $156800
cost of goods sold (d = b-c)	$505400 - $141512 = $363888	$363888	$560000 - $156800 = $403200	$403200
gross margin (a - d)		$644112		$648350

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