Cleveland Corporation Manufactures Can product from a process that yields a by-product called FIZZ. The by-product requires additional processing cost of $30,000. The by-product will require selling and administrative expenses totaling $20,000. It is Cleveland's accounting policy to charge the joint costs to the main product only. Information concerning a batch produced during the year ended December 31, 2020 follows: Product Units Produced Market Value at Split Units Sold Off 100,000 8,000 The joint costs incurred up to split-off point are: Can FIZZ $50 $10 60,000 8,000 Direct materials $2,000,000 Direct labor 800,000 Factory overhead 200,000 The selling and administrative expense of Cleveland Corporation for the year ended December 31, 2020 is $1,000,000 exclusive of that for the by-product. Required: 1. What is the gross profit for the year if the net revenue from by-product is presented as other income? 2. What is the gross profit for the year if the net revenue from by=-product is presented as additional sales revenue? 3. What is the net income for the year if the net revenue from by-product is presented as a deduction from the cost of goods sold? 4. What is the net income for the year if the net revenue from by-product is presented as a deduction from the total manufacturing cost of the main product?
Cleveland Corporation Manufactures Can product from a process that yields a by-product called FIZZ. The by-product requires additional processing cost of $30,000. The by-product will require selling and administrative expenses totaling $20,000. It is Cleveland's accounting policy to charge the joint costs to the main product only. Information concerning a batch produced during the year ended December 31, 2020 follows: Product Units Produced Market Value at Split Units Sold Off 100,000 8,000 The joint costs incurred up to split-off point are: Can FIZZ $50 $10 60,000 8,000 Direct materials $2,000,000 Direct labor 800,000 Factory overhead 200,000 The selling and administrative expense of Cleveland Corporation for the year ended December 31, 2020 is $1,000,000 exclusive of that for the by-product. Required: 1. What is the gross profit for the year if the net revenue from by-product is presented as other income? 2. What is the gross profit for the year if the net revenue from by=-product is presented as additional sales revenue? 3. What is the net income for the year if the net revenue from by-product is presented as a deduction from the cost of goods sold? 4. What is the net income for the year if the net revenue from by-product is presented as a deduction from the total manufacturing cost of the main product?
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
Related questions
Question
Transcribed Image Text:Cleveland Corporation Manufactures Can product from a process that yields a by-product called FIZZ.
The by-product requires additional processing cost of $30,000. The by-product will require selling and
administrative expenses totaling $20,000. It is Cleveland's accounting policy to charge the joint costs to
the main product only. Information concerning a batch produced during the year ended December 31,
2020 follows:
Product
Units Produced
Market Value at Split
Units Sold
Off
100,000
8,000
The joint costs incurred up to split-off point are:
Can
FIZZ
$50
$10
60,000
8,000
Direct materials
$2,000,000
Direct labor
800,000
Factory overhead
200,000
The selling and administrative expense of Cleveland Corporation for the year ended December 31, 2020
is $1,000,000 exclusive of that for the by-product.
Required:
1. What is the gross profit for the year if the net revenue from by-product is presented as other
income?
2. What is the gross profit for the year if the net revenue from by=-product is presented as
additional sales revenue?
3. What is the net income for the year if the net revenue from by-product is presented as a
deduction from the cost of goods sold?
4. What is the net income for the year if the net revenue from by-product is presented as a
deduction from the total manufacturing cost of the main product?
Expert Solution
This question has been solved!
Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.
Step by step
Solved in 5 steps
Knowledge Booster
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, accounting and related others by exploring similar questions and additional content below.Recommended textbooks for you
Accounting
Accounting
ISBN:
9781337272094
Author:
WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.
Publisher:
Cengage Learning,
Accounting Information Systems
Accounting
ISBN:
9781337619202
Author:
Hall, James A.
Publisher:
Cengage Learning,
Accounting
Accounting
ISBN:
9781337272094
Author:
WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.
Publisher:
Cengage Learning,
Accounting Information Systems
Accounting
ISBN:
9781337619202
Author:
Hall, James A.
Publisher:
Cengage Learning,
Horngren's Cost Accounting: A Managerial Emphasis…
Accounting
ISBN:
9780134475585
Author:
Srikant M. Datar, Madhav V. Rajan
Publisher:
PEARSON
Intermediate Accounting
Accounting
ISBN:
9781259722660
Author:
J. David Spiceland, Mark W. Nelson, Wayne M Thomas
Publisher:
McGraw-Hill Education
Financial and Managerial Accounting
Accounting
ISBN:
9781259726705
Author:
John J Wild, Ken W. Shaw, Barbara Chiappetta Fundamental Accounting Principles
Publisher:
McGraw-Hill Education