Problem 6 Lucille Inc manufactures a product that gives rise to a by-product called “Robon”. The only cost associated with Robon are additional processing cost of P1.00 for each unit. Lucille accounts for Robon sales first by deducting its separable costs from such sales and then by deducting this net amount from the cost of sales of the major product. For the past year, 2,000 units of Robon were produced which were sold for P3.00 each. Sales revenue and cost of goods sold from the main product were P500,000 and P400,000 respectively. If Lucille changes its method of accounting for Roblon sales by showing the net amount as “other income”, the effect on gross margin would be (increase of decrease of what amount?)
Problem 6
Lucille Inc manufactures a product that gives rise to a by-product called “Robon”. The only cost associated with Robon are additional
Sales revenue and cost of goods sold from the main product were P500,000 and P400,000 respectively.
If Lucille changes its method of accounting for Roblon sales by showing the net amount as “other income”, the effect on gross margin would be (increase of decrease of what amount?)
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