potato skins are generated as a by product in making potato 267843

Potato skins are generated as a by product in making potato chips and frozen hash browns at Zeena Foods. The skins are sold to restaurants for use in appetizers. Processing and disposal costs associated with by product sales are $0.06 per pound of potato skins. During May 2010, Zeena Foods produced and sold 135,000 pounds of potato skins for $20,250. In addition, the joint cost for producing potato chips and hash browns was $82,000; separate costs of production were $48,000. In May, 90 percent of all joint production was sold for $319,000. Nonfactory operating expenses for May were $47,850.

a. Prepare an income statement for Zeena Foods assuming that by product sales are shown as Other Revenue and the processing and disposal costs for the by product are shown as additional cost of goods sold of the joint products.

b. Prepare an income statement for Zeena Foods assuming that the net realizable value of the by product is shown as Other Income.

c. Prepare an income statement for Zeena Foods assuming that the net realizable value of the by product is subtracted from the joint cost of the main products.

d. Would the presentation in (a), (b), or (c) be most helpful to managers? Why?