Question

Emeloid Manufacturing Company processes direct materials up to the split-off point where two products (X and Y) are obtained and sold. The following information was collected for the month of November:  

Direct materials processed:

10,200 gallons (10,200 gallons yield 9500 gallons of good product and

700 gallons of shrinkage)  

Production:

X

5300 gallons

Y	4200 gallons

Sales:

X

5050 at $300 per gallon

Y	3950 at $80 per gallon

The cost of purchasing 10,200 gallons of direct materials and processing it up to the split-off point to yield a total of 9500 gallons of good products was $1,050,000.  

The beginning inventories totaled 35 gallons for X and 400 gallons for Y. Ending inventory amounts reflected 565 gallons of Product X and 1,515,000 gallons of Product Y. October costs per unit were the same as November.  

Using the physical-volume method, what is Product X's approximate gross-margin percentage? (Round all intermediary calculations two decimal places.)

Answer 1

1)calculate sales amount of Product 'X'(note 1)

= 5050gallon×$300 =$1515000

2) calculate cost of goods sold of 5300 gallons of Product X

= Cost of goods sold of 5300 gallons= total cost of goods sold/(production gallons of Product X+Product Y)×production gallons of Product X

=$1050000×5300/5300+4200

= $1050000×5300/9500 = $585789

3) calculate cost of goods sold of 5050 gallons (note 2)

= Cost of goods sold of Product X5050/5300

= $585789×5050/5300=$558157

Particular	amount
Sales(above note 1)	$1515000
(-) cost of goods sold of 5050gallons	($558157)
Gross profit	$956843

Gross margin percentage = gross profit/sales×100

= $956843/$1515000×100 =63 %

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