Beverage Drink Company processes direct materials up to the splitoff point where two products, A and B, are obtained. The following information was collected for the month of July: The cost of purchasing 2,500 liters of direct materials and processing it up to the splitoff point to yield a total of 2,000 liters of good products was $4,500. There were no inventory balances of A and B.
Product A may be processed further to yield 1,375 liters of Product Z5 for an additional processing cost of $150. Product Z5 is sold for $25.00 per liter. There was no beginning inventory and ending inventory was 125 liters.
Product B may be processed further to yield 375 liters of Product W3 for an additional processing cost of $275. Product W3 is sold for $30.00 per liter. There was no beginning inventory and ending inventory was 25 liters.
If Product Z5 and Product W3 are produced, what are the expected sales values of production, respectively?
A)$11,250 and $34,375
B)$22,500 and $ 5,000
C)$31,250 and $10,500
D)$34,375 and $11,250

Question

Beverage Drink Company processes direct materials up to the splitoff point where two products, A and B, are obtained. The following information was collected for the month of July:    The cost of purchasing 2,500 liters of direct materials and processing it up to the splitoff point to yield a total of 2,000 liters of good products was $4,500. There were no inventory balances of A and B.
Product A may be processed further to yield 1,375 liters of Product Z5 for an additional processing cost of $150. Product Z5 is sold for $25.00 per liter. There was no beginning inventory and ending inventory was 125 liters.
Product B may be processed further to yield 375 liters of Product W3 for an additional processing cost of $275. Product W3 is sold for $30.00 per liter. There was no beginning inventory and ending inventory was 25 liters.
If Product Z5 and Product W3 are produced, what are the expected sales values of production, respectively?
A)$11,250 and $34,375 
B)$22,500 and $ 5,000 
C)$31,250 and $10,500 
D)$34,375 and $11,250

Quizplus · Accepted Answer

First, let's calculate the cost of the 2,000 liters of good products obtained at the splitoff point:
$4,500 / 2,000 L = $2.25 per liter
For Product A:
The cost of processing 1,375 liters of Product Z5 is $150, so the total cost of 1,375 liters of Product Z5 is:
1,375 L * $2.25/L + $150 = $3,468.75
The sales value of 1,250 liters of Product Z5 is:
1,250 L * $25/L = $31,250
We need to subtract the ending inventory of 125 liters at the end of the month from the total production of 1,375 liters:
$31,250 - (125 L * $25/L) = $28,125
For Product B:
The cost of processing 375 liters of Product W3 is $275, so the total cost of 375 liters of Product W3 is:
375 L * $2.25/L + $275 = $1,031.25
The sales value of 350 liters of Product W3 is:
350 L * $30/L = $10,500
We need to subtract the ending inventory of 25 liters at the end of the month from the total production of 375 liters:
$10,500 - (25 L * $30/L) = $9,750
Therefore, the expected sales values of production for Product Z5 and Product W3 are $28,125 and $9,750, respectively. 
The only answer choice that matches this is option D.

Beverage Drink Company Processes Direct Materials Up to the Splitoff