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Methods deduct by-product revenues

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Reference no: EM13537923

In certain continuous process industries, such as chemicals, the problem of accounting for the cost of by-products often occurs. The following data is available:

Sale of main product 10,000 @ Rs. 10 each.

Total production cost. 12,000 @ Rs. 6 each.

Selling & Admin. Expenses Rs. 20,000

Sales of by-products Rs. 4,800

Required: You are required to prepare income statements separately under the following two methods:

i. Deduct by-product revenues from the cost of production of the main product.

ii. Treat by-product revenues as an additional source of income in the income statement.

iii. Also indicate which method would you prefer and why?

Reference no: EM13537923

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