Reference no: EM132633537
The Evrett 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 2012, the selling prices of the items and the total amounts sold were as follows:
- 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. Evrett 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.
Problem 1: How can compute the cost of inventories of X, Y an Z using NRV method, constant gross margin percentage NRV method and how to compare the gross margin percentages for X,Y and Z using the NRV method and constant gross- margin percentage NRV method