The Sister Steel Co. manufactured 100 pounds of product L and 3,000 pounds of product M during October 19X7. Management did not allocate any joint costs to product L for costing or inventory purposes and considered product L a by-product. The production costs incurred before separation were $15,000. Both products were processed further. Sister Steel Co. uses a process cost system to accumulate costs. mki7

Required:
a Management treats income from by-products as a deduction from cost of goods sold of the main product. Show the income statement for Sister Steel Co.
b Show the income statement if management decided to show net by-product income as an addition to other income.
c Write the journal entries relating to the by-product. Ignore income taxes.

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Additional costs after separation: Direct labor (dollars) Fixed overhead (dollars) Variable overhead (dollars) Direct materials (dollars) Selling expenses (dollars) Administrative expenses (dollars) Total revenue from sales (dollars) Beginning inventory (units) Ending inventory (units) Product L Product M $ 250 $ 3,600 60 650 25 1,100 40 2,050 105 1.200 30 900 3,000 30,000 0 0 0 500