Reference no: EM132746833

Fundador Inc. manufactures X product from a process that yields a by- product called Z. The by-product requires additional processing cost of P30,000. The By-product will require selling and administrative expenses totaling P20,000. It is Fundador's accounting policy to charge the joint costs to the main product only.

Information concerning a batch produced during the year ended December 31, 2019 follows:

Product                      Units Produced               MV at split off           Unit Sold

X                               100,000                     P50                      60,000

Z                                8,000                           10                     8,000

The joint costs incurred up to split off point are:

Direct materials P2,000,000

Direct Labor 800,000

Factory Overhead 200,000

The selling and administrative expense of Fundador, Inc. for the year ended December 31, 2019 is P1,000,000 exclusive of that for the by-product.

Problem 1: The gross profit for the year if the net revenue from by-product is presented as additional sales revenue is:

a. P1,230,000

b. P1,218,000

c. P1,118,000

d. P1,200,000