DRY Corporation recently disposed of a by-product at a net cost of $500. Provided that amount is considered material, the $500 should be accounted for as:
A) Part of the separable cost of the by-product
B) A decrease in by-product inventory on the balance sheet
C) An increase in by-product inventory on the balance sheet
D) Part of the joint costs of production

Question

Quizplus · Accepted Answer

The cost of disposing of a by-product is considered a joint cost of production, as it relates to the production process as a whole rather than specific to the by-product. Therefore, the $500 cost should be allocated as part of the joint costs of production.

DRY Corporation Recently Disposed of a By-Product at a Net