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Question
hotch potch ltd manufactures a main product x and a by product y. cost of production is $150000.sales of main product is $180000 and this amount to 90%of output and remainder is held as closing stock.
output of by product has a sales value of $.$800 is sold during the month and the balance remains in stock.
required:
calculate the profit using the four methods of accounting for by products.i want to ask whether total value of by product is accounted for or just the sold value?
also give me answers….plzzzzIf all the by-product were sold for, say 1,000 you can Dr Cash 1000 and post the Cr against the cost of the main product.
If half were sold I would Dr Cash 500, Dr By-product inventory 500 and Cr 1,000 against the cost of the main product.
Som people might say you are recognising the sale proceeds before you get them, but if you don’t do this then the cost of the main product will vary depending on the amount of the by-product sold.
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