Question
Yum, Inc. is a producer of potato chips. A single production process at Yum, Inc., yields potato chips as the main product, as well as
Yum, Inc. is a producer of potato chips. A single production process at Yum, Inc., yields potato chips as the main product, as well as a byproduct that can be sold as a snack. Both products are fully processed by the splitoff point, and there are no separable costs. For September 2020, the cost of operations is $485,000. Production and sales data are as follows:
There were no beginning inventories on September 1, 2020.
Requirements:
1. | What is the gross margin for Yum, Inc., under the production method and the sales method of byproduct accounting? |
2. | What are the inventory costs reported in the balance sheet on September 30, 2020, for the main product and byproduct under the two methods of byproduct accounting in requirement 1? |
3. | Prepare the journal entries to record the byproduct activities under (a) the production method and (b) the sales method. Briefly discuss the effects on the financial statements. |
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