Q3. Blue Paper Company processes wood pulp into two products. During January the joint costs of processing were $144,000. Production and sales value information for the month were as follows:

Sales Value at

Product Kilograms Produced splitoff Point Separable Costs

Paper 130,000 $80,000 $224,000

Cardboard 108,000 70,000 264,000

Paper sells for $2.75 a kilogram and cardboard sells for $3.50 a kilogram.

There were no beginning inventories for January but ending inventories totalled 10,000 kilograms for paper and 12,000 kilograms for cardboard.

Required:

Prepare a product line income statement in gross margin format. Joint costs are allocated using the net realizable value method assuming all available product is sold.