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 780,000 gallons of direct materials and processing it up to the split-off point to yield a total of 758,500 gallons of good product was $2,310,000. When using a physical-volume measure, what is the approximate amount of joint costs that will be allocated to cream and liquid skim? (Round intermediary percentages to the nearest hundredth.)
A) $1,350,657 and $959,343
B) $1,155,000 and $1,155,000
C) $1,345,524 and $964,476
D) $1,313,442 and $996,558

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 780,000 gallons of direct materials and processing it up to the split-off point to yield a total of 758,500 gallons of good product was $2,310,000. When using a physical-volume measure, what is the approximate amount of joint costs that will be allocated to cream and liquid skim? (Round intermediary percentages to the nearest hundredth.)
A) $1,350,657 and $959,343 
B) $1,155,000 and $1,155,000 
C) $1,345,524 and $964,476 
D) $1,313,442 and $996,558

Quizplus · Accepted Answer

Cream: 443,500 / 758,500 = 58.47%
Liquid skim: 315,000 / 758,500 = 41.53%
Joint costs allocated to Cream = $2,310,000 × 58.47% = $1,350,657
Joint costs allocated to Liquid skim = $2,310,000 × 41.53% = $959,343

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