Question

Acme Company makes a product and produces a by-product. In the current month the costs in the Mixing Department were:

Materials          $80,000

Labor                $5,000

Overhead         $10,000

During the month 100,000 pounds of materials were processed. Of this, 90,000 of main product were transferred to the next department, and 10,000 pounds of by-product were recovered. The by product can be sold for .02 per pound.

What is the journal entry to account for the by-product if they treat the market value of the byproduct as misc. income?

Date	Account	Debit	Credit
1/31/xx	By product inventory
	misc. income

What is the journal entry if they treat the market value of the by-product as a reduction to the work in process of the current department (Mixing)?

Date	Account	Debit	Credit
1/31/xx

What is the cost per unit of the main product if they treat the market value of the byproduct as misc. income? _____________________

What is the cost per unit of the main product if they treat the market value of the by-product as a reduction to the work in process of the current department (Mixing) ________________________

Answer 1

	journal entry to account for the by-product if they treat the market value of the byproduct as misc. income
1	Date	Account	Debit	Credit
	31/01/XXXX	By Products Inventory	$          200
		Misc. Income		$          200
			$          200	$          200
	journal entry if they treat the market value of the by-product as a reduction to the work in process of the current department (Mixing) (WIP will reduce by $200)
2	Date	Account	Debit	Credit
	31/01/XXXX	Work in Progress Inventory	$    80,000
		Overhead Cost Pool	$    15,000
		Raw Materials Inventory		$    80,000
		Labour		$      5,000
		Overhead		$    10,000
			$    95,000	$    95,000
3	Date	Account	Debit	Credit
	31/01/XXXX	By Products Inventory	$          200
		Work in Progress Inventory		$          200
			$          200	$          200

Cost per unit of the main product if they treat the market value of the byproduct as misc. income:-

$1.06 Per Unit

cost per unit of the main product if they treat the market value of the by-product as a reduction to the work in process of the current department (Mixing)

$1.05 Per Unit