Allocating Joint Costs Using the Constant Gross Margin Method

A company manufactures three products, L$-$Ten, Triol, and Pioze, from a joint process. Each production run costs $$13,000.$ None of the products can be sold at split$-$off, but must be processed further. Information on one batch of the three products is as follows:

Product Gallons Further Processing

Cost per Gallon Eventual Market

Price per Gallon

L$-$Ten $3,600$ $$0\mathrm{.}50$ $$2\mathrm{.}00$

Triol $4,0001\mathrm{.}005\mathrm{.}00$

Pioze $2,5001\mathrm{.}506\mathrm{.}00$

Required:

Calculate the total revenue, total costs, and total gross profit the company will earn

on the sale of L$-$Ten, Triol, and Pioze.

Total Revenue

Allocate the joint cost to L$-$Ten, Triol, and Pioze using the constant gross margin

percentage method. Round the gross margin percentage to four decimal places

and round all other computations to the nearest dollar.

Joint Cost

$($Note: The joint cost allocation does not equal due to rounding.$)$

What if it cost $$2\mathrm{.}00$ to process each gallon of Triol beyond the split$-$off point? How

would that affect the allocation of joint cost to these three products? Round the gross

margin percentage to four decimal places and round all other computations to

the nearest dollar.

$($Note: The joint cost allocation does not equal due to rounding.$)$