Answer the following questions using the information below:
The Alfarm Corporation processes raw milk up to the splitoff 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:
$\begin{array}{lll}
\text { Direct materials processed: } && 750,000 \text { gallons }(727,500 \text { gallons of good product) } \
\text { Production: } & \text { Cream } & 442,500 \text { gallons } \
& \text { Liquid skim } & 285,000 \text { gallons } \
\text { Sales: } & \text { Cream } & 421,500 \text { at } \$ 110 \text { per gallon } \
& \text { Liquid skm } & 273,000 \text { at } \$ 100 \text { per gallon }
\end{array}$ The cost of purchasing 750,000 gallons of direct materials and processing it up to the splitoff point to yield a total of 727,500 gallons of good product was $2,280,000.
-When using a physical-volume measure,what is the approximate amount of joint costs that will be allocated to cream and liquid skim?
A) $1,386,804 and $893,196
B) $1,140,000 and $1,140,000
C) $1,368,000 and $912,000
D) $1,254,00 and $1,026,000

Question

Answer the following questions using the information below:
The Alfarm Corporation processes raw milk up to the splitoff 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:
 $\begin{array}{lll}
\text { Direct materials processed: } && 750,000 \text { gallons }(727,500 \text { gallons of good product) } \
\text { Production: } & \text { Cream } & 442,500 \text { gallons } \
& \text { Liquid skim } & 285,000 \text { gallons } \
\text { Sales: } & \text { Cream } & 421,500 \text { at } \$ 110 \text { per gallon } \
& \text { Liquid skm } & 273,000 \text { at } \$ 100 \text { per gallon }
\end{array}$ The cost of purchasing 750,000 gallons of direct materials and processing it up to the splitoff point to yield a total of 727,500 gallons of good product was $2,280,000.
-When using a physical-volume measure,what is the approximate amount of joint costs that will be allocated to cream and liquid skim?
A) $1,386,804 and $893,196
B) $1,140,000 and $1,140,000
C) $1,368,000 and $912,000
D) $1,254,00 and $1,026,000

Quizplus · Accepted Answer

The correct answer is A because the physical-volume measure allocates joint costs based on the physical volume of each product produced. In this case, 442,500 gallons of cream were produced and 285,000 gallons of liquid skim were produced, for a total of 727,500 gallons. Therefore, the joint costs of $2,280,000 will be allocated as follows:Cream: $2,280,000 x 442,500 / 727,500 = $1,386,804Liquid skim: $2,280,000 x 285,000 / 727,500 = $893,196

Answer the Following Questions Using the Information Below: the Alfarm

Answer the Following Questions Using the Information Below:
the Alfarm