The Alfarm Corporation processes raw milk up to the split-off point where two products, cream and liquid skim, are produced and sold. There was no beginning inventory. The following material was collected for the month of February:

The cost of purchasing 820,000 gallons of direct materials and processing it up to the split-off point to yield a total of 797,500 gallons of good product was $2,350,000. What are the physical-volume proportions to allocate joint costs for cream and liquid skim, respectively?
A) 54.02% and 45.98%
B) 55.55% and 44.45%
C) 50.00% and 50.00%
D) 53.17% and 46.83%

Question

The Alfarm Corporation processes raw milk up to the split-off point where two products, cream and liquid skim, are produced and sold. There was no beginning inventory. The following material was collected for the month of February:

The cost of purchasing 820,000 gallons of direct materials and processing it up to the split-off point to yield a total of 797,500 gallons of good product was $2,350,000. What are the physical-volume proportions to allocate joint costs for cream and liquid skim, respectively?
A) 54.02% and 45.98% 
B) 55.55% and 44.45% 
C) 50.00% and 50.00% 
D) 53.17% and 46.83%

Quizplus · Accepted Answer

Cream: 443,000 / 797,500 = 55.55%
Liquid skim: 354,500 / 797,500 = 44.45%

The Alfarm Corporation Processes Raw Milk Up to the Split-Off