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Two joint products A and B are produced in a process. Data for the process for the last period are as follows:
Product A B
Sales 480 320
Production 600 400
Common production costs in the period were $12000. There were no opening inventory. Both production had a gross margin of 40%. Common production costs were apportioned on a physical basis.
What was the gross profit for product A in the period?
Ans) 3840
Please sir, can you explain this question?The joint cost per unit is $12 (as explained in my free lectures on process costing: joint costs.)
They sold 380 units of A, and therefore the cost of sales is 480 x $12 = $5,760.
The gross margin is 40% (of sales) and therefore the cost of sales is 60% of the sales.
There the profit is 40/60 x $5,760 = $3,840.
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