Holy Cow is a producer of milk and byproducts. A single production process at Holy Cow yields milk as the main product, as well as ghee, a byproduct of milk production, that can be sold. Both products are fully processed by the splitoff point, and there are no separable costs. For the month of October 2020, the cost of operations is $380,000.

Production and sales data are as follows:

	Production (in gallons)	Sales (in gallons)	Selling Price per Gallon
Milk	540,000	523,800	$0.80
Ghee, byproduct	12,000	11,400	$0.70

There were no beginning inventories on October 1, 2020.

1.	What is the gross margin for Holy Cow under the production method and the sales method of byproduct accounting?
2.	What are the inventory costs reported in the balance sheet on October 31, 2020, for the main product and byproduct under the two methods of byproduct accounting in requirement 1?

Production Method

Sales Method

Revenues

Main product: Milk

Byproduct: Ghee

Total revenues

Cost of goods sold:

Total manufacturing costs

Deduct byproduct revenue and inventory

Net manufacturing costs

Deduct main-product inventory

Cost of goods sold

Gross margin