Question
Ellison Inc. produces two main products (Product D24 and Product G68, and a byproduct. On June 1, the company had no beginning inventories. During the
Ellison Inc. produces two main products (Product D24 and Product G68, and a byproduct. On June 1, the company had no beginning inventories. During the month, the company incurred $607,500 in joint costs, which were allocated to the main products using the physical measures method. The company also incurred $100,000 in selling and administrative expenses. Additional information for the month of June was as follows:
Product | Unit produced | Units Sold | Selling price per unit |
Product D24 | 54,000 | 43,200 | $55.00 |
Product G68 | 81,000 | 68,850 | $70.00 |
Byproduct | 17,000 | 15,400 | $4.00 |
Required
(A) Assuming that the company recognizes byproduct revenue at the time of sale, what is the total value of ending inventory?
(B) Compute the COGS for each of the main products and prepare an Income Statement assuming that the company recognizes byproduct revenue at the time of sale.
(C) Now assuming that the company recognizes byproduct revenue at the time of production, what is the total value of ending inventory?
(D) Compute the COGS for each of the main products and prepare an Income Statement assuming that the company recognizes byproduct revenue at the time of production.
(E) Describes the two methods for accounting for byproducts and discuss which method would be more appropriate to use and why.
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started