Two standard measures of accounting for by-products that are sold at the split-off point are to consider by-product net realizable value as other revenue or deduct by-product net realizable value from cost of goods sold.

Question

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These two methods are commonly used in accounting for by-products; treating the net realizable value of by-products as other revenue or deducting it from the cost of goods sold, both approaches aim to accurately reflect the financial benefit of by-products in financial statements.

Two Standard Measures of Accounting for By-Products That Are Sold