Use the Information Below to Answer the Following Question(s)

question 1

Multiple Choice

Use the information below to answer the following question(s) .Beverage Drink Company processes direct materials up to the splitoff point, where two products, A and B, are obtained.The following information was collected for the month of July:
Direct materials processed: 2,500 litres (with 20 percent shrinkage)
Cost of purchasing 2,500 litres of direct materials and processing it up to the splitoff point to yield a total of 2,000 litres of good products was $4,500.There were no inventory balances of A and B.Product A may be processed further to yield 1,375 litres of Product Z5 for an additional processing cost of $150.Product Z5 is sold for $25.00 per litre.There was no beginning inventory and ending inventory was 125 litres.Product B may be processed further to yield 375 litres of Product W3 for an additional processing cost of $275.Product W3 is sold for $30.00 per litre.There was no beginning inventory and ending inventory was 25 litres.
-All of the following statements about the constant gross margin percentage of net realizable method are true EXCEPT

• A)all products have equal gross margin percentages.
• B)it is based on a tenuous underlying assumption.
• C)the gross margin percentage remains the same regardless of the different amounts of separable costs.
• D)the gross margin is calculated by deducting all separable costs from revenue.
• E)some products may receive negative allocations of joint costs.

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Definitions:

Property Rights

Property rights are the legal rights to use, control, and dispose of property, including land, buildings, or intellectual property.

Central Planning

A system where a nation's government makes all decisions regarding the economy, including resources allocation and production levels.

Unselfish Behavior

Actions that prioritize the welfare of others over one's own personal benefit.

Economic System

A particular set of institutional arrangements and a coordinating mechanism for solving the economizing problem; a method of organizing an economy, of which the market system and the command system are the two general types.