Computing the value of a by-product by the reversal cost method. In the Shaping Department of Spira Company, a by-product is removed. The material is further processed and then sold. The company uses the reversal cost method to account for the by-product. Data for December 19X7 follow. Compute the value to be assigned to the by-product and removed from Work in Process at the point of separation.

Amount of by-product removed, 7,800 pounds Estimated sales price of by-product, $1 per pound Estimated manufacturing cost after separation, $.30 per pound Estimated selling and administrative expenses, 20 percent of sales price Estimated normal net profit, 6 percent of sales price