Otto IncBegan the Current Period with No Inventories

Essay

Otto Inc.began the current period with no inventories.During the period,it processed 50,000 kilograms of materials costing $450,000.Conversion costs incurred during the period amounted to $660,000.The firm ended the period with no work in process.During the period,the firm produced 16,000,24,000,and 10,000 units of X,Y,and Z,respectively.All costs are considered joint costs.The firm sold 12,000 units of X,16,000 units of Y,and 9,000 units of Z.X sells for $30 per unit,Y for $44 per unit,and Z for $4 per unit.The firm uses the net realizable value method for cost allocation.Z is considered a by-product.
a.Discuss the following methods to account for by-products:
• other income
• replacement cost
• joint cost proration
b.Give three examples of by-products.