A dairy allocates the cost of unprocessed milk to theproduction of milk, cream,
ID: 2433519 • Letter: A
Question
A dairy allocates the cost of unprocessed milk to theproduction of milk, cream, butter and cheese. For the currentperiod, unprocessed milk was purchased for $240,000, and thefollowing quantities of product and sales revenues wereproduced.Product pounds price per pound
milk 100,000 $.90 cheese 50,000 2.20 butter 20,000 1.00 Cream 10,000 3.00
How much of the $240,000 cost should be allocated to milk? A dairy allocates the cost of unprocessed milk to theproduction of milk, cream, butter and cheese. For the currentperiod, unprocessed milk was purchased for $240,000, and thefollowing quantities of product and sales revenues wereproduced.
Product pounds price per pound
milk 100,000 $.90 cheese 50,000 2.20 butter 20,000 1.00 Cream 10,000 3.00
How much of the $240,000 cost should be allocated to milk?
Explanation / Answer
_____________________________________________________ Product Pounds PricePer Pound Total Revenue______________________________________________________
milk 100,000 $0.90 $90,000 cheese 50,000 $2.20 $110,000 butter 20,000 $1.00 $20,000 Cream 10,000 $3.00 $30,000 -------------------------------------------------------------------------- Total 180,000 $250,000 ================================================== Allocation of Cost of Unprocessed milk to Product milk on thebasis of Sales Revenue ========================================================== Allocated cost = $90,000(Sales Revenue Of Milk) x$240,000(Total cost of unprocessed milk) / $90,000 (TotalRevenue) = $86,400
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