Cola 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.
What is Product Z5's estimated net realizable value at the splitoff point?
A)$11,100
B)$22,350
C)$34,225
D)$34,375

Question

Cola 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.
What is Product Z5's estimated net realizable value at the splitoff point?
A)$11,100 
B)$22,350 
C)$34,225 
D)$34,375

Quizplus · Accepted Answer

To find the estimated net realizable value of Product Z5, we need to calculate the revenue generated from selling Product Z5 after processing it further, less any additional processing costs incurred after the splitoff point.

Revenue from Product Z5:
1,375 liters x $25.00 per liter = $34,375

Additional processing cost for Product Z5:
$150

Estimated net realizable value of Product Z5:
$34,375 - $150 = $34,225

Therefore, the estimated net realizable value of Product Z5 at the splitoff point is $34,225.

As for the best choice(s), it would depend on the specific goals and strategies of the company. Without more information, it is not possible to determine the best choice(s).

Cola Drink Company Processes Direct Materials Up to the Splitoff