Chem Manufacturing Company processes direct materials up to the splitoff point where two products (X and Y) are obtained and sold

ACCOUNTING

Multiple Choice

Chem Manufacturing Company processes direct materials up to the splitoff point where two products (X and Y) are obtained and sold. The following information was collected for the month of November.

Direct materials processed: 10,000 gallons (10,000 gallons yield 9,500 gallons of good product and 500 gallons of shrinkage)

Production: X 5,000 gallons

Y 4,500 gallons


Sales: X 4,750 at $150 per gallon

Y 4,000 at $100 per gallon


The cost of purchasing 10,000 gallons of direct materials and processing it up to the splitoff point to yield a total of 9,500 gallons of good products was $975,000.

The beginning inventories totaled 50 gallons for X and 25 gallons for Y. Ending inventory amounts reflected 300 gallons of Product X and 525 gallons of Product Y. October costs per unit were the same as November.

Using the physical-volume method, what is Product X's approximate gross-margin percentage?

a. 32%

b. 33%

c. 35%

d. 38%

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