By-Product Costing—Net Revenue and Market Value (Reversal Cost) Methods, in the manufacture of its main product, the Welsh Company produces a by-product. Joint production cost incurred to the point of separation totals $200,000. After separation, cost of $150,000 is incurred to complete the main product, and $5,000 is incurred to complete the by-product. The main product has a final market value of $400,000, and the by-prod¬ uct has a final market value of $20,000. There is no ending inventory. LO5 Required:

(1) Assume that the net revenue method is used to account for the by-product as other income and that the by¬ product’s marketing and administrative expenses are zero. How much other income should be reported on the income statement?

(2) Assume that management wants to allocate $2,000 of marketing and administrative expenses to the by¬ product and still have a profit of 10% of the sales price. Using the market value (reversal cost) method, cal¬ culate how much of the joint cost should be allocated to the by-product.