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Question 2 Using the Constant Gross Margin Percentage Method for Allocating Joint Costs Green Paper Company processes wood pu
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Answer #1

in constant gross margin percentage method the overall gross profit ratio is calculated

use that gross profit margin ratio to allocate gross margin to product line and deduct it from sales to find out costs.

paper card Total
units sold 120000[130000-10000] 96000[108000-12000]
sale per unit 2.75 3.50
total sales 330000 336000 666000
less: joint cost (144000)
less : separable cost (488000)
Gross profit 34000

Gross profit ratio = gross profit/sales*100

=34000/666000*100

=5.105105%

sales gross margin gross profit Total cost separable cost joint cost allocated
paper 330000 5.105105% 16847 313153[330000-16847] 224000 89153[313153-224000]
card 336000 5.105105% 17153 318847[336000-17153] 264000 54847[318847-264000]

income statment

paper card
sales 330000 336000
less:
Allocated cost 89153 54847
separable cost 224000 264000
Gross profit 16847 17153
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