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1. By-Product Costing and Entries. The Lynda Chemical Company manufactures a prime product known as Lyn. In producing this prime chemical, a by-product results which can be marketed and sold as is for S.20 per Kg or processed further and sold at $.50per Kg. The further processing requires materials of S3,00; labour of $2,000 and factory overhead of $1,000.
The production costs of the main product and by-product up to the split-off point for the month of April were as follows:
Materials $100,000
Labour 80,000
Factory overhead 68,000
These costs were sufficient to manufacture 150,000 Kg of Lyn and 20,000 Kg of the by-product.
Required: Entries for the by-product when it is :
(a) Stored without assigning to it any cost and later marketed and sold. No further costs have been added.
(b) Not processed further but stored and priced using market price to secure its value and reducing the cost of the main product by the amount allocated to the by-product.
(c) Processed Further and stored and no costs prior to separation being allocated to it.
(d) Processed further and stored, the cost prior to separation being allocated to it, using the market values at the split-off point for allocating costs prior to separation. The main product sells at $2 per kg.
