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Compute the net income

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Question - Pink Inc. manufactures Zen products from a process that yield a by-product called YAN. 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 ZEN

Units produced: 100,0000

Market value of Split off: P50

Units sold: 60,000

Product YAN

Units produced: 8,000

Market value of Split off: P10

Units sold: 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 EEE Inc. is P1,000,000 exclusive of that for the by-product.

Required -

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

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

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

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

Reference no: EM132784456

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