Question
Arctic Blast Oceanic Water (AOW) desalinates and bottles sea water. The desalinated water is in high demand from a large group of environmentally conscious
Arctic Blast Oceanic Water (AOW) desalinates and bottles sea water. The desalinated water is in high demand from a large group of environmentally conscious people on the west coast of Canada. During March, AOW processes 1,500 litres of sea water and obtains 1,500 litres of drinking water and 90 kilograms of sea salt (the rest of the sea water evaporates in the desalinization process). Processing the 1,500 litres of water costs AOW $2,100. AOW sells 1,200 litres of the desalinated water in 2-litre containers for $6 per container. In addition, AOW sells 80 kilograms of sea salt for $1.50 per kilogram. Due to the relatively small proportion of sea salt, AOW has decided to treat it as a byproduct. Required Requirements 1 and 2. Assuming AOW accounts for the byproduct using the production method, what is the inventoriable cost for each product and AOW's gross margin? Calculate the gross margin and gross margin percentage for Arctic Blast Oceanic Inc. under the production method, and then for the sales method. (Only complete the necessary boxes, do not enter "0". Round interim calculations to the nearest cent. Round final answers to the nearest whole dollar. Round the gross margin percentage to two decimal places.)
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