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The Watson Company operates a simple chemical process to convert a single material into three separate items, referred to here as X, Y, and
The Watson Company operates a simple chemical process to convert a single material into three separate items, referred to here as X, Y, and Z. All three end products are separated simultaneously at a single splitoff point. Products X and Y are ready for sale immediately upon splitoff without further processing or any other additional costs. Product Z, however, is processed further before being sold. There is no available market price for Z at the splitoff point. The selling prices quoted here are expected to remain the same in the coming year. During the year, the selling prices of the items and the total amounts sold were as follows: (Click the icon to view the sales information.) Required (Click the icon to view additional information.) Requirement 1a. Compute the cost of inventories of X, Y, and Z for the purposes of the statement of financial position and the cost of goods sold for operating income statement purposes as of December 31, using the NRV joint cost allocation method. Begin by computing the net sales value for total production at the point of splitoff and the weighting for each product. (Round the weightings to two decimal places.) Net sales value of total production at splitoff Weighting X Y Z Total Required 1. Compute the cost of inventories of X, Y, and Z for the purposes of the statement of financial position and the cost of goods sold for operating income statement purposes as of December 31, using the following joint cost allocation methods: a. NRV method b. Constant gross margin percentage NRV method 2. Compare the gross margin percentages for X, Y, and Z using the two methods provided in requirement 1. Sales information - X-70 tons sold for $2,000 per ton Y-240 tons sold for $1,500 per ton Z-380 tons sold for $1,000 per ton Print Done
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