The Kirkland Recycling Company $($KRC$)$ purchases old water and soda bottles and recycles them to produce plastic covers for outdoor furniture. The company processes the bottles in a special piece of

equipment that first melts, then reforms the plastic into large sheets that are cut to size. The edges from the cut pieces are sold for use as package filler. The filler is considered a byproduct. KRC can

produce $21$ table covers, $77$ chair covers and $9$ pounds of package filler from $100$ pounds of bottles.

More info

In June, KRC had no beginning inventory. It purchased and processed $160,000$

pounds of bottles at a cost of $$640,000.$ KRC sold $26,000$ table covers for $$14$

each, $75,000$ chair covers for $$7$ each, and $7,000$ pounds of package filler at $$0\mathrm{.}50$

per pound.

Requirements

Assume that $KRC$ allocates the joint costs to table and chair covers using the

sales value at splitoff method and accounts for the byproduct using the

production method. What is the ending inventory cost for each product and

gross margin for KRC$?$

Assume that KRC allocates the joint costs to table and chair covers using the

sales value at splitoff method and accounts for the byproduct using the sales

method. What is the ending inventory cost for each product and gross margin

for KRC$?$

Discuss the difference between the two methods of accounting for byproducts,

focusing on what conditions are necessary to use each method.