Pyramid Printing Company is a printer of magazines and retail inserts. In additi

Question

Pyramid Printing Company is a printer of magazines and retail inserts. In addition, there are two joint products (food wrapping and book covers) and one byproduct (shipping-box inserts) that originate from the trimmings of Pyramid’s paper rolls in production. The food wrapping and book covers are the same size. The shipping-box inserts are sold to online retailers for shipping books. All joint products and byproducts are sold as sustainable alternatives to other recycling opportunities.

Pyramid’s cost information by process follows:

The shipping-box inserts are able to be sold for $800,000 to online retailers.

Requirements:

   1   Determine the cost of food wrapping and book covers if the sales method is used for shipping-box inserts.

   2   Determine the cost of food wrapping and book covers if the production method is used for shipping box inserts.

   3   Which method would you suggest is the best for Pyramid?

Pyramid Products Pounds of Production Cost Magazines 400,000 $ 1,400,000 Retail inserts 360,000 $ 1,000,000 Food wrapping 100,000 $ 1,200,000 Book covers 240,000 $ 1,600,000 Shipping-box inserts 20,000 $ 40,000

Explanation / Answer

Ans. 1&2Cost of food wrapping and book covers would be $12 and $6.67 per pound respectively. It would remain same in  sales method or  production method is used for shipping box inserts.

Ans3.Either of method can be adopted.

Pyramid Products Pounds of Production Cost $ Cost per Pound Magazines 400,000 1,400,000 3.5 Retail inserts 360,000 1,000,000 2.78 Food wrapping 100,000 1,200,000 12 Book covers 240,000 1,600,000                        6.67 Shipping-box inserts 20,000 40,000 2

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