The Gows Company processes unprocessed goat milk up to the splitoff point where
ID: 2438103 • Letter: T
Question
The Gows Company processes unprocessed goat milk up to the splitoff point where two products, condensed goat milk and skim goat milk result. The following information was collected for the month of October.
The costs of purchasing the 130,000 gallons of unprocessed goat milk and processing it up to the splitoff point to yield a total of 117,000 gallons of salable product were $144,480. There were no inventory balances of either product.
Condensed goat milk may be processed further to yield 39,000 gallons (the remainder is shrinkage) of a medicinal milk product, Xyla, for an additional processing cost of $3 per usable gallon. Xyla can be sold for $18 per gallon.
Skim goat milk can be processed further to yield 56,200 gallons of skim goat ice cream, for an additional processing cost per usable gallon of $2.50. The product can be sold for $9 per gallon.
There are no beginning and ending inventory balances.
What is the estimated net realizable value of the skim goat ice cream at the splitoff point?
Minimized View
$220,400
$170,900
$365,300
$505,800
Minimized View
Explanation / Answer
Product received from process Quantity (gallons) Relisable Amount at Further Processing Done Cost of processing of skim goat milk of 56,200 gallons $ (140,500.00) on Skim goat milk SKIM GOAT ICECREAM 56200 $ 505,800.00 $ 365,300.00
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