Ee.94. By-product costing. In the manufacture of itsmain product, the Hominy Company produces aby-product. Joint production costs incurred tothe point of separation totaled $150,000. Afterseparation, costs totaling $100,000 wereincurred to complete the main product, and$2,000 was incurred to complete the by-product. The main product had a final marketvalue of $350,000, and the by-product had afinal market value of $10,000. There is noending inventory.Required:(1) Assume that the net revenue method is usedto account for the by-product as other incomeand that the by-product's marketing andadministrative expenses are zero. How muchother income should be reported on the incomestatement?(2) Assume that management wants to allocate$1,000 of marketing and administrativeexpenses to the by-product and still have aprofit of 15% of the sales price. Using the marketvalue (reversal cost) method, how much of thejoint cost should be allocated to the by-product?

Part-1 Net Realizable Value Method Main Product By Product Sales value 350000 10000…

(1) Assume that the net revenue method is used to account for the by-product as other income and that the by-product's marketing and administrative expenses are zero. How much other income should be reported on the income statement? (2) Assume that management wants to allocate $1,000 of marketing and administrative expenses to the by-product and still have a profit of 15% of the sales price. Using the market value (reversal cost) method, how much of the joint cost should be allocated to the by- product?

(1) Assume that the net revenue method is used to account for the by-product as other income and that the by-product's marketing and administrative expenses are zero. How much other income should be reported on the income statement? (2) Assume that management wants to allocate $1,000 of marketing and administrative expenses to the by-product and still have a profit of 15% of the sales price. Using the market value (reversal cost) method, how much of the joint cost should be allocated to the by- product?

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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