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Question - Compassion Company produces a product known as VITAMIX from which by-product results. This by- product can be sold at P4.25 per pound. The manufacturing costs of the main product & by- products up to the point of separation for the three months ended March 31, 2021 follows:
Materials 50,000
Labor 40,000
Overhead 30,000
Total 120,000
The units processed were 15,000 pounds of the main product and 900 pounds of the by-products. During the period, 12,000 pounds of the VITAMIX were sold at P16, while the company was able to sell 600 pounds of the by- product. Selling and administrative expenses elated to the main product amounted to P18,000. Disposal cost per each unit of the by- product is P1.75.
Required - Determine the net income of Compassion Company by using Method A to account for the by- product.
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