Manufacturing cost               23,000             2,200                  1,800 after separation Selling and general                12,000              1,500                 1,100 expenses

FINANCIAL ACCOUNTING
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Chapter1: Financial Statements And Business Decisions
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Exercise 8-7. REVERSAL COST METHOD FOR BY-PRODUCTS

RC Inc. manufactures one main product and two by-products. Data for July of the current year follow:

                                                Main          By product          Byproduct

                                               Product               A                             B

Sales                                     P150,000        P 12,000               P 7,000

Manufacturing cost              75,000                -                              -

before separation

Manufacturing cost               23,000             2,200                  1,800

after separation

Selling and general                12,000              1,500                 1,100

expenses

REQUIRED: An income statement, assuming no beginning or ending inventories and using the reversal cost method for the by-products, allowing a 15% operating profit for Byproduct A and 12% operating profit for Byproduct B.

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