The Lazar Company has two producing departments: the Shaving Department and the Polishing Department. In the Shaving Department, shavings are collected and sold as a by-product. Management follows the policy of assigning the market value at the point of separation as the cost of the by-product. Without further processing, the by-product could be sold for $7.50 per kilogram, but selling and administrative expenses of $.17 per kilogram would be incurred. After further processing, the by-product could be sold for $11.70 per kilogram, but selling and administrative expenses of $.23 per kilogram would be incurred. The necessary processing costs for 3,010 kilograms are estimated as shown on page 371.

Materials $2,244 Labor 4,860 Overhead 2,520 1. Prepare a schedule showing the estimated net profit or loss from the sale of 3,010 kilograms of the by-product without further processing.
2. Prepare a schedule showing the estimated net profit or loss from the sale of 3,010 kilograms of the by-product after further processing. Remember to take the common costs of the by-product into consideration as well as the expenses of further processing.
3. Should the by-product be processed further? Explain.
Chapter