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 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 20,000 $ 40,000 The shipping-box inserts are able to be sold for $800,000 to online retailers.
Requirements:
1 Determine the cost of food wrapping and book covers if the sales method is used for shipping-box inserts.
2 Determine the cost of food wrapping and book covers if the production method is used for shipping box inserts.
3 Which method would you suggest is the best for Pyramid?