Pulkits Silk Shirts (PSS) hand-makes blouses and sells them to high-end department stores. PSS buys bolts of

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Pulkits Silk Shirts (PSS) hand-makes blouses and sells them to high-end department stores. PSS buys bolts of silk for $300 each. Out of each bolt it gets 30 blouses, which it sells for $90 each. PSS's new manager has suggested taking the scraps left after cutting out the blouses and using them to make scarves. By carefully cutting the blouses, PSS can produce 6 scarves from each bolt, which it can sell for $25 each. During September, PSS buys 50 bolts of silk and spends an additional $10,000 on the cutting and sewing process. By the end of the month, PSS sells 1,200 blouses and 260 scarves made from these bolts. Because the scarves are lower in value than the blouses, PSS decides to treat the scarves as a byproduct.

Required

1. Assuming PSS accounts for the byproduct using the production method, what is the inventoriable cost of each product and PSS's gross margin?

2. Assuming PSS accounts for the byproduct using the sales method, what is the inventoriable cost of each product and PSS's gross margin?

3. Show all journal entries for the month of September assuming PSS accounts for the byproduct using

(a) The production method and

(b) The sales method.

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Related Book For  book-img-for-question

Cost Accounting A Managerial Emphasis

ISBN: 978-0133138443

7th Canadian Edition

Authors: Srikant M. Datar, Madhav V. Rajan, Charles T. Horngren, Louis Beaubien, Chris Graham

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