Pyramid Printing Company is a printer of magazines and retail inserts. In addition, there are two joint products (food wrapping and book covers) and one byproduct (shipping-box inserts) that originate from the trimmings of Pyramid's paper rolls in production.
The food wrapping and book covers are the same size. The shipping-box inserts are sold to online retailers for shipping books. All joint products and byproducts are sold as sustainable alternatives to other recycling opportunities.
Pyramid's cost information by process follows:
|
Pyramid Printing Company Products
|
Pounds of production
|
Cost
|
|
Magazines
|
400,000
|
$1,400,000
|
|
Retail inserts
|
360,000
|
1,000,000
|
|
Food wrapping
|
100,000
|
1,200,000
|
|
Book covers
|
240,000
|
1,600,000
|
|
Shipping-box inserts (byproduct)
|
20,000
|
40,000
|
The shipping-box inserts are able to be sold for $800,000 to online retailers.
Requirements:
Determine the cost of food wrapping and book covers if the sales method is used for shipping-box inserts.
Determine the cost of food wrapping and book covers if the production method is used for shipping box inserts.
Which method would you suggest is the best for Pyramid?