Question
The Seoul Company manufactures a product which has a byproduct as part of the process.The only costs associated with the byproduct are selling costs of
The Seoul Company manufactures a product which has a byproduct as part of the process.The only costs associated with the byproduct are selling costs of $1 for each unit of byproduct sold. The company accounts for byproduct sales by first deducting its separable costs and then by deducting this net amount from the cost of sales of the major product. This year, the company sold 1,000 units of byproduct at $5 each.
Required: If the company changes its method of accounting for this byproduct by recording the net amount as other income, by how many dollars will the gross margin decrease?
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