Question

1. Navarro Company began operations on 1/1/20 and produces tumbling mats and rebound mats for cheerleading. Both types of mats are manufactured from a joint process. During January 2020, the company incurred joint production costs of $89,500 and produced 2,000 tumbling mats and 500 rebound mats. Navarro believes the tumbling mats will require separate costs past the split-off point of $14.00 per unit, and the company believes it will be able to sell the tumbling mats for $150.00 per unit. Navarro believes the rebound mats will require separate costs past the split-off point of $10.00 per unit, and the company believes it will be able to sell the rebound mats for $100.00 per unit.

               

What amount of joint costs should be allocated to each product using the constant gross margin percentage method?

Answer 1

	Tumbling	Rebound	Total
Sales Value	$         300,000	$           50,000	$       350,000
Separable Costs	$           28,000	$             5,000	$          33,000

Gross Margin = $350000-33000-89500 = $227,500
Gross Margin percentage = $227500 / 350000 = 65%

	Tumbling	Rebound	Total
Sales Value	$         300,000	$           50,000	$       350,000
Less Gross Margin	$       (195,000)	$          (32,500)	$      (227,500)
Less Separable Costs	$          (28,000)	$            (5,000)	$        (33,000)
Allocation of Joint Costs	$           77,000	$           12,500	$         89,500