Question
In the third department of a company, a portion of the materials (a by-product) is removed, further processes and sold. The company uses reversal cost
In the third department of a company, a portion of the materials (a by-product) is removed, further processes and sold. The company uses reversal cost method to account for the by-product. Data for May follow:
Amount of by-product removed 2,000 units
Estimated sales price of by-product after further processing. Php 1.20/unit
Estimated processing cost after separation, Php 0.30/unit
Estimated selling expenses, 10% of sales price
Estimated normal profit margin, 5% of sales price
What is the gain (or loss) on sale of by-product if all the units are sold at Php 1.50?
What is the total cost of the by-product?
Step by Step Solution
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Step: 1
First we need to calculate the estimated total revenue and gross margin of the byproduct Estimated t...Get Instant Access to Expert-Tailored Solutions
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Step: 2
Step: 3
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