In the manufacture of its main product, the Washington Company produces a by-product. Joint production cost incurred to the point of separation totals $200,000. After separation, cost of $ 150,000 is incurred to complete the main product, and $6,000 is incurred to complete the by-product. The main product has a final market value of $400,000, and the by-product has a final market value of $20,000. There is no ending inventory.
Required:
(1) Assume that the net revenue method is used to account for the by-product as other income and that the by-product's marketing and administrative expenses are zero. How much other income should be reported on the income statement?
(2) Assume that management wants to allocate $1,000 of marketing and administrative expenses to the by-product and still have a profit of 10% of the sales price. Using the market value (reversal cost) method, calculate how much of the joint cost should be allocated to the by-product.