Otto IncBegan the Current Period with No Inventories

question 89

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.

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Definitions:

Non-U.S. Stocks

Shares of companies incorporated outside the United States available for investment.

Passive Benchmark

A standard, typically an index, against which the performance of an investment portfolio can be gauged, emphasizing a passive investment strategy.

Foreign Exchange Risk

The potential for financial loss due to fluctuations in exchange rates affecting foreign-denominated investments or transactions.

Translation Exposure

The risk that a company's financial statements can be affected by changes in exchange rates when foreign operations are consolidated.