Colbert Corporation produces a product called Spots are Out, which gives rise to a byproduct called Sunshine. The only costs associated with Sunshine are additional processing costs of $4 for each unit. Colbert accounts for Sunshine's sales first by deducting its separable costs from its sales and then by deducting this net amount from the cost of sales of Spots are Out. This year, 9,600 units of Sunshine were produced. They were all sold for $8 each. Company operating expenses were $250,000 for the year. Sales revenue and cost of goods sold for Spots are Out were $1,600,000 and $800,000 respectively. (CPA AdapteD.
(a) Calculate the company's gross margin under the current accounting method.
(b) Assume the company changes its accounting method and accounts for the byproduct's net-realizable-value as "other revenue. "
Calculate the gross margin under the new method.
(c) Under what circumstances would method a or b be preferred?

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The Answer of Colbert Corporation produces a product called Spots are Out, which gives rise to a byproduct called Sunshine. The only costs associated with Sunshine are additional processing costs of $4 for each unit. Colbert accounts for Sunshine's sales first by deducting its separable costs from its sales and then by deducting this net amount from the cost of sales of Spots are Out. This year, 9,600 units of Sunshine were produced. They were all sold for $8 each. Company operating expenses were $250,000 for the year. Sales revenue and cost of goods sold for Spots are Out were $1,600,000 and $800,000 respectively. (CPA AdapteD.
(a) Calculate the company's gross margin under the current accounting method.
(b) Assume the company changes its accounting method and accounts for the byproduct's net-realizable-value as "other revenue. "
Calculate the gross margin under the new method.
(c) Under what circumstances would method a or b be preferred?

Colbert Corporation Produces a Product Called Spots Are Out, Which