Sky airlines produces two different aircrafts. The joint process incurs costs of $10 million. Both aircrafts can be sold at split-off or processed further to increase the final sales value. The following information is related to the two products. (all costs are recorded in millions) If the sales price at split-off provided is reliable, what is the gross margin for B752, using the appropriate method of allocation?
A)$215 million.
B)$215.5 million.
C)$215.74 million.
D)$220 million.

Question

Sky airlines produces two different aircrafts. The joint process incurs costs of $10 million. Both aircrafts can be sold at split-off or processed further to increase the final sales value. The following information is related to the two products. (all costs are recorded in millions)  If the sales price at split-off provided is reliable, what is the gross margin for B752, using the appropriate method of allocation?
A)$215 million. 
B)$215.5 million. 
C)$215.74 million. 
D)$220 million.

Quizplus · Accepted Answer

$230 + $310 = $540
$230 ÷ $540 x $10 = $4.26
$420 - $200 - $4.26 = $215.74 
B752sale at split-off + B797 sale at split-off = total sale at split-off 
B752sale at split-off ÷ total sale at split-off x joint process costs = B752 joint cost 
B752 final sales- B752 further processing cost - B752 joint cost

Sky Airlines Produces Two Different Aircrafts