Question

Products G and H are joint products developed from the same process with each being processed...

Products G and H are joint products developed from the same process with each being processed further. Joint costs are incurred until splitoff, the separable costs are incurred in further refining each product. Sales value at splitoff method is used to allocate joint costs. If the sales value of G at splitoff decreases
and all other costs and selling prices remain unchanged, then

Group of answer choices:

G’s gross margin decreases; H’s gross margin decreases

G’s gross margin decreases; H’s gross margin increases

G’s gross margin increases; H’s gross margin decreases

G’s gross margin increases; H’s gross margin increases

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Answer #1

The correct answer is

G's gross margin increases: H's gross margin decreases

Explanation

Since the sale value of G has decreased at split off point due to which the joint cost allocated to G has decreased, due to which the gross margin of G has increased. and so joint cost allocated to H has increased, due to which the gross margin of H has decreased.

So the correct answer is

G's gross margin increases: H's gross margin decreases

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