Gross Margin Percent
Unitron Corporation The RSV method has a number of twists that can result in many different unit costs for the five
Question 1 products. For inventory costing purposes, any The idea here is to construct a "Produced systematic cost allocation system will do. The basic
As/Sold As Matrix" (400,000 x 400,000). Obviously, idea of the relative sales value scheme is that all sales the possible combinations are endless, so how does one should show gross margin percent equal to the average choose a "best" approach? The "best" solution is to gross margin percent across the full joint product set. start with demand for the highest value product (405) This average is 19% [(246 - 200) (246)]. This does and work back unsold production to the next lowest imply 5 different costs for the 5 different products, value product (404) to fill sales demand, and so forth based on the 5 different selling prices. As long as no until 401 sales demand is filled (see Exhibit A). product switching occurs, the basic idea is easily The idea is to minimize potential revenue loss. preserved. Note here that the relevant designation for a
In a static sense [$246,000 Revenue], any tableau is as product is the sales designation. Anything sold as a good as any other. But, in a dynamic sense, future 401 will carry 401 cost. revenue is always unknown. In that sense, the firm Here are the resulting unit cost numbers: minimizes potential loss by only trading down one level. Unit Costs 401 402 403 404 405 Since some substitution is necessary anyway, Physical units method $0.50 $0.50 $0.50 $0.50 there is no reason to try to avoid it. Half the 405's $0.50 produced will be sold as 404's, and two thirds of the Relative sales value method
404's produced will be sold as 403's, and so on down [Sales price x (1-.19)] the line. Thus, in economic terms, only the "sold as" $0.40 x 0.81 .32 numbers have meaning.
Question 1 products. For inventory costing purposes, any The idea here is to construct a "Produced systematic cost allocation system will do. The basic
As/Sold As Matrix" (400,000 x 400,000). Obviously, idea of the relative sales value scheme is that all sales the possible combinations are endless, so how does one should show gross margin percent equal to the average choose a "best" approach? The "best" solution is to gross margin percent across the full joint product set. start with demand for the highest value product (405) This average is 19% [(246 - 200) (246)]. This does and work back unsold production to the next lowest imply 5 different costs for the 5 different products, value product (404) to fill sales demand, and so forth based on the 5 different selling prices. As long as no until 401 sales demand is filled (see Exhibit A). product switching occurs, the basic idea is easily The idea is to minimize potential revenue loss. preserved. Note here that the relevant designation for a
In a static sense [$246,000 Revenue], any tableau is as product is the sales designation. Anything sold as a good as any other. But, in a dynamic sense, future 401 will carry 401 cost. revenue is always unknown. In that sense, the firm Here are the resulting unit cost numbers: minimizes potential loss by only trading down one level. Unit Costs 401 402 403 404 405 Since some substitution is necessary anyway, Physical units method $0.50 $0.50 $0.50 $0.50 there is no reason to try to avoid it. Half the 405's $0.50 produced will be sold as 404's, and two thirds of the Relative sales value method
404's produced will be sold as 403's, and so on down [Sales price x (1-.19)] the line. Thus, in economic terms, only the "sold as" $0.40 x 0.81 .32 numbers have meaning.