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| Kode Co. manufactures a major product that gives rise to a by-product called May. May’s only separable cost is a $1 selling cost when a unit is sold for $4. Kode accounts for May’s sales by deducting the $3 net amount from the cost of goods sold of the major product. There are no inventories. If Kode were to change its method of accounting for May from a by-product to a joint product, what would be the effect on Kode’s overall gross margin? A. No effect. B. Gross margin increases by $1 for each unit of May sold. C. Gross margin increases by $3 for each unit of May sold. D. Gross margin increases by $4 for each unit of May sold. |
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