Use the following information for the next 2 questions.
A joint input costing $500 results in four distinct products at the point of split-off. Relevant data follows:
-Suppose a by-product is created continuously and sold for cash at the end of each day. If the proceeds of the by-product sales are used to reduce the joint production costs, an increase in the by-products sales value will
A) Increase the profit reported for by-product sales
B) Decrease the profit reported for by-product sales
C) Decrease the gross margin reported by the main products
D) Increase the gross margin reported by the main products

Question

Use the following information for the next 2 questions.
A joint input costing $500 results in four distinct products at the point of split-off. Relevant data follows: 
-Suppose a by-product is created continuously and sold for cash at the end of each day. If the proceeds of the by-product sales are used to reduce the joint production costs, an increase in the by-products sales value will
A) Increase the profit reported for by-product sales 
B) Decrease the profit reported for by-product sales 
C) Decrease the gross margin reported by the main products 
D) Increase the gross margin reported by the main products

Quizplus · Accepted Answer

An increase in the by-product sales value reduces the joint production costs, which in turn increases the gross margin reported by the main products.

Use the Following Information for the Next 2 Questions