Figure 7-7 Garden of Eden Company manufactures two products, Brights and Dulls, from a joint process. A production run costs $50,000 and results in 250 units of Brights and 1,000 units of Dulls. Both products must be processed past the split-off point, incurring separable costs for Brights of $60 per unit and $40 per unit for Dulls. The market price is $250 for Brights and $200 for Dulls.
Refer to Figure 7-7. What is the gross profit for Brights assuming the physical units method is used?

Question

Quizplus · Accepted Answer

The gross profit for Brights is calculated by first determining the total revenue from Brights (250 units * $250 = $62,500) and then subtracting the joint cost allocated to Brights and the separable costs. Using the physical units method, the joint cost allocated to Brights is ($50,000 * (250 / (250 + 1000))) = $10,000. The separable costs for Brights are (250 units * $60 = $15,000). Therefore, the gross profit is $62,500 - $10,000 - $15,000 = $37,500.

Figure 7-7 Garden of Eden Company Manufactures Two Products, Brights