The Yameen 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.

During 2017, the selling prices of the items and the total amounts sold were as follows:

Read the requirements3.

Requirement 1. Compute the cost of inventories of X, Y, and Z for balance sheet purposes and the cost of goods sold for income statement purposes as of December 31, 2017,

using the (a) NRV, and the (b) constant gross-margin percentage NRV cost allocation methods.

(a) Start with the NRV cost allocation method. Begin by computing the net realizable value for total production at the point of splitoff and the weighting for each product. (Enter the weights to two decimal places.)

	X	Y	Z	Total
Net realizable value of total production at splitoff
Weighting

Calculate the joint costs allocated to each of the three products and enter them into the table below. Next, enter the additional costs to process each product after the split, if any, to determine the total production costs of each product using the NRV method. (Enter a "0" for any cells with a zero balance.)

NRV method:	X	Y	Z	Total
Joint costs allocated

Additional costs to process
Total productions costs

Determine the formula needed to compute the cost of goods sold using the NRV method.

(1)

(2)

(3)

=

Cost of goods sold (NRV method)

Compute the cost of goods sold for income statement purposes as of December 31, 2017, using the NRV cost allocation method.

NRV method:	X	Y	Z	Total
Cost of goods sold

Determine the formula needed to compute the cost of ending inventory using the NRV method.

(4)

(5)

(6)

=

Ending inventory (NRV method)

Compute the cost of inventories of X, Y, and Z for balance sheet purposes as of December 31, 2017, using the NRV cost allocation method.

NRV method:	X	Y	Z	Total
Ending inventory

(b) Compute the cost of inventories of X, Y, and Z for balance sheet purposes and the cost of goods sold for income statement purposes as of December 31, 2017, using the constant gross-margin percentage NRV cost allocation method.

Yameen's constant gross-margin percentage for the period ending December 31, 2017 is

%.

Determine the total costs to produce the products under the constant gross-margin percentage NRV cost allocation method.

Constant GM percentage NRV method:	X	Y	Z	Total
Final sales value of total production
Less: gross margin
Total production costs

Determine the formula needed to compute the cost of goods sold using the constant gross margin (GM) percentage NRV method.

								Constant GM%
(7)		(	(8)	-	(9)	)	=	Cost of goods sold

Compute the cost of goods sold for income statement purposes as of December 31, 2017, using the constant gross-margin percentage NRV cost allocation method.

Constant GM percentage NRV method:	X	Y	Z	Total
Cost of goods sold

Determine the formula needed to compute the ending inventory using the constant gross-margin percentage NRV method.

(10)

-

(11)

=

Ending inventory (Constant GM%)

Compute the cost of inventories of X, Y, and Z for balance sheet purposes as of December 31, 2017, using the constant gross-margin percentage NRV cost allocation method.

Constant GM percentage NRV method:	X	Y	Z	Total
Ending inventory

Requirement 2. Compare the gross-margin percentages for X, Y, and Z using the two methods given in requirement 1. (Round the gross margin percentages to one decimal place, X.X%.)

Allocation method	X		Y		Z
NRV		%		%		%
Constant GM percentage NRV		%		%		%

1: More Info

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.

2: More Info

X - 75 tons sold for $1,800 per ton

Y - 225 tons sold for $1,300 per ton

Z - 280 tons sold for $800 per ton

The total joint manufacturing costs for the year were $328,000. Yameen spent an additional $120,000 to finish product Z. There were no beginning inventories of X, Y, or Z. At the end of the year, the following inventories of completed units were on hand: X, 175 tons; Y, 75 tons; Z, 70 tons. There was no beginning or ending work in process.

3: Requirements

1.	Compute the cost of inventories of X, Y, and Z for balance sheet purposes and the cost of goods sold for income statement purposes as of December 31, 2017, using the following joint-cost-allocation methods:
	a.	NRV (Net realizable value) method
	b.	Constant gross-margin percentage NRV method
2.	Compare the gross-margin percentages for X, Y, and Z using the two methods given in requirement 1.