The production processes involved in making maple syrup also can produce maple sugar. Vt. Sugar Enterprises wishes to produce only syrup, but on occasion some sugarging takes place. Production for April produced the following results:
Syrup Sugar Total
Units produced 20,000 1,000 21,000
Units selling price $15.00 $2.00
Total process costs:
After split off $12,000 $2.80 $12,280
Joint Costs $100,000
a. Calculate the cost of the syrup if the sugar is considered a by product and the gross margin from its sale is considered to be a reduction of syrup cost.
b. Calculate product costs assuming this company decided to make and sell as much maple sugar as possible after filing all syrup orders (i.e., it regarded syrup and sugar as joint products). Use the sales value method.
The solution contains the computation of product cos of syrup if sugar is considered as by product and if the sugar is considered as joint product.