The Lynnwood Recycling Company(LRC) 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. LRC can produce 27 table covers, 72 chair covers and 6 pounds of package filler from 100 pounds of bottles.

In June, LRC had no beginning inventory. It purchased and processed 140,000 pounds of bottles at a cost of $560,000. LRC sold 29,000 table covers for $8 each, 75,000 chair covers for $4 each, and 1,000 pounds of package filler at $0.80 per pound.

1.	Assume that LRC 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 LRC?
2.	Assume that LRC 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 LRC?
3.	Discuss the difference between the two methods of accounting for byproducts, focusing on what conditions are necessary to use each method.

Requirement 1.

First, allocate the joint costs. (Round the weighting values to two decimal places.)

	Table	Chair
	Covers	Covers	Total
Sales values at splitoff
Weighting
Joint costs allocated