Garden of Eden Company manufactures two products, Brights and Dulls, from a join
ID: 2537012 • Letter: G
Question
Garden of Eden Company manufactures two products, Brights and Dulls, from a joint process. A production run costs $50,000 and results in 250 units of Brights and 1,000 units of Dulls. Both products must be processed past the split-off point, incurring separable costs for Brights of $60 per unit and $40 per unit for Dulls. The market price is $250 for Brights and $200 for Dulls.
What is the gross profit for Dulls assuming the constant gross margin percentage method is used?
$37,500
$200,000
$150,000
$120,000
a.$37,500
b.$200,000
c.$150,000
d.$120,000
Explanation / Answer
250 units of Brights and 1,000 units of Dulls by incurring $50000 as Production run cost. So, ratio is Brights:Dulls is 1:4.
Production run cost for Dulls = 50000/5 * 4 = 40000
Seperable cost for Dulls = 40*1000 = 40000
Total market price for Dulls = 200*1000 = 200000
The gross profit for Dulls = 200000- 40000 - 40000 = 120000
Answer is
$120,000
d.$120,000
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