Compute the gross profit, The by-product requires

Compute the gross profit

Reference no: EM132779265

Question - Orange manufactures Zia products from a process that yield a by-product called Ian. The by-product requires additional processing cost of P30,000. The by-product will require selling and administrative expenses totalling P20,000. It is the company's policy to charge the joint costs to the main product only. Information concerning a batch produced during the year ended December 31, 202x. follows:

Product Units Produced Market Value at Split-off Units Sold

Zia 100,000 P50 60,000

Ian 8,000 P10 8,000

The joint costs incurred up to the split-off point are:

Raw materials P2,000,000

Direct labor 800,000

Factory overhead 200,000

The selling and administrative expense of AAA is P1,000,000 exclusive of that for the by-product.

Compute -

1. Gross profit if the net revenue from the by-product is presented as other income

2. Gross profit if the net revenue from the by-product is presented as additional sales revenue

3. Net income if the net revenue from the by-product is presented as deduction from cost of goods sold

4. Net income if the net revenue from the by-product is presented as deduction from the total manufacturing cost of the main product

ESSAY -

1. What is a joint product?

2. What are by-products?

3. Provide clearcut distinctions for the different methods of joint and by-product costing.

Reference no: EM132779265

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