The JKL Company produces a product known as “VITAMIX” from which by product results. This by-product can be sold at P4.25 a pound. The manufacturing costs of the main product and by-product up to the point of separation for the three months ended March 31, 2021 follows:
Materials, P50,000;
Labor, P40,000;
Overhead, P30,000.
The units processed were 15,000 pounds of the main product and 900 pounds of the by-product. During the period, 12,000 pounds of the “VITAMIX” were sold at P16, while the company was able to sell 600 pounds of the by-product. Selling and administrative expenses elated to the main product amounted to P18,000. Disposal cost per each unit of the by-product is P1.75.
1.Assume that the by-product is inventoried and recorded at net realizable value. The net realizable value of the by-product reduces the manufacturing costs of “VITAMIX”.
2. What is the unit cost of “VITAMIX”? Assume that the by-product is recorded as realized. What is the cost of inventory of “VITAMIX”?
3. Assume that the by-product is not inventoried and the net realizable value of the by-product is deducted from the CGS of “VITAMIX”. What is the gross profit?
4. Assume that the by-product is not inventoried. The net amount realized from the sale of the by-product is reported as other revenue. What is the net income?
