Ted Brown Is the Chief Financial Officer of Haywood Inc

question 35

Essay

Ted Brown is the chief financial officer of Haywood Inc., a large manufacturer of cosmetics and other personal care products.Ted is conducting a financial analysis of the firm's line of hand lotions which consists of three products: SkinSalve, SkinCream, and SkinBalm.Total sales for the three products in the recent year were $400,000, $250,000 and $500,000, respectively.Because there is a small amount of additional processing cost for each of the three products, which differs between the products ($20,000, $50,000 and $30,000, respectively), Ted has been using the net realizable value method for allocating the joint production cost of $500,000.However, he is not satisfied with the result of somewhat different gross margin percentage ratios (gross margin/sales) for the three products when using this approach.He knows only of the physical units method, the sales value at split-off method, and the net realizable value method for allocating joint cost.
Required: Devise a new method of cost allocation for Ted so that after allocation of joint costs and separable costs, the gross margin percentage is the same for all three products.

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Definitions:

Background

The context or circumstances surrounding a situation, or the part of a visual image that lies behind the main subjects.

Scene Composition

In filmmaking or photography, the arrangement of visual elements within a shot or frame to convey a desired message or emotion.

Data Visualization

The representation of data in graphical or pictorial format to make information easier to understand.

Audience Distraction

Anything that diverts the audience's attention away from the intended focus of a presentation or performance.