In Department C of Samantha Corporation, a portion of the materials (a by-product) is removed further processed and sold. The entity uses the reversal cost method to account for the by-product. Data for June include: Amount of by-product removed is 2,000 units; Estimated sales price of by-product after processing further is $1.20/unit. Estimated processing cost after separation is $0.30 per unit and estimated selling expenses is 10% of the sales price. The estimated profit margin is 5% of the sales price. a. How much is the total cost of the by-product? b. How much is the gain (loss) on sale of the by-product if all of the units are sold at $1.50?
In Department C of Samantha Corporation, a portion of the materials (a by-product) is removed further processed and sold. The entity uses the reversal cost method to account for the by-product. Data for June include: Amount of by-product removed is 2,000 units; Estimated sales price of by-product after processing further is $1.20/unit. Estimated processing cost after separation is $0.30 per unit and estimated selling expenses is 10% of the sales price. The estimated profit margin is 5% of the sales price. a. How much is the total cost of the by-product? b. How much is the gain (loss) on sale of the by-product if all of the units are sold at $1.50?
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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In Department C of Samantha Corporation, a portion of the materials (a by-product) is removed further processed and sold. The entity uses the reversal cost
method to account for the by-product. Data for June include: Amount of by-product
removed is 2,000 units; Estimated sales price of by-product after processing further is
$1.20/unit. Estimated
estimated selling expenses is 10% of the sales price. The estimated profit margin is
5% of the sales price.
a. How much is the total cost of the by-product?
b. How much is the gain (loss) on sale of the by-product if all of the units are sold at $1.50?
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