Accounting for a main product and a byproduct. (Cheatham and Green, adapted) Bill Dundee is the owner and operator of Western Bottling, a bulk soft drink producer. A single production process yields two bulk soft drinks, Rainbow Dew (the main product) and Resi-Dew (the byproduct). Both products are fully processed at the splitoff point, and there are no separable costs.

Summary data for September 2007 are as follows:

Cost ofsoft drink operations = $144,000 Production and sales data:

Main product (Rainbow Dew)

Byproduct (Resi-Dew)

Production Sales

(in Litres) (in Litres)

10,000 8,000 2,000 1,400 Selling Price per Litre

$24.00 2.40 There were no beginning inventories on September 1, 2007. The following is an overview of operations:

Required 1. What is the gross margin for Western Bottling under methods A, B, and C of byproduct accounting?
2. What are the inventory amounts reported in the balance sheet on September 30, 2007, for Rainbow Dew and Resi-Dew under each of the two methods of byproduct accounting cited in requirement 1 ?
3. Which method would you recommend Western Bottling use? Explain.