The Pullman Recycling Company $($PRC$)$ 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. PRC can produce $23$ table covers, $70$ chair covers and $8$ pounds of package filler from $100$ pounds of bottles.

$($Click the icon to view additional information.$)$

Read the requirements.

More info

In June, PRC had no beginning inventory. It purchased and processed $140,000$ pounds of bottles at a cost of $$700,000.$ PRC sold $30,000$ table covers for $$9$ each, $82,000$ chair covers for $$5$ each, and $6,000$ pounds of package filler at $$0\mathrm{.}50$ per pound.

Requirements

Assume that PRC 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 PRC$?$

Assume that PRC 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 PRC$?$

Discuss the difference between the two methods of accounting for byproducts, focusing on what conditions are necessary to use each method.