Answer the following questions using the information below: The Green Company pr
ID: 2582947 • Letter: A
Question
Answer the following questions using the information below: The Green Company processes unprocessed goat milk up to the splito point where two products, condensed goat milk and skim goat milk result. The following information was collected for the month of October:
Direct Materials processed: 130,000 gallons (shrinkage was 10%)
Production
Condensed goat milk 52,200 gallons
Skim goat milk 64,800 gallons
Sales
Condensed goat milk $3.50 per gallon
Skim goat milk $2.50 per gallon
The costs of purchasing the 130,000 gallons of unprocessed goat milk and processing it up to the splito point to yield a total of 117,000 gallons of saleable product was $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.
(a) Assume Sales value at splitoff method is used for allocating joint cost, calculate the gross margin of Xyla and skim goat ice cream respectively.
(b) Assume NRV method is used for allocating joint cost, calculate the gross margin of Xyla and skim goat ice cream respectively.
Explanation / Answer
Sale value at split off point method:
Amount spent = 144480
Total available after first shrinkage = 130000 - 13000 = 117000
Total amount
Spent at split
Offer point
Sale value of
Final product
Profit margin. . . . . . . . . . . . .80.74%.....60.58%
2) NRV value at split off point :
NRV of product through condensed milk = 18 - 3 = 15
NRV of product through skimmed milk = 9 - 2.5 = 6.5
Particulars Qty Amount Condense skimmed Total - a 117000 52200 64800 Sale value - b 3.5 2.5 Product (a X b) 182700 162000 % of product 53% 47%Total amount
Spent at split
Offer point
144480 76574 67906 Cost per gallon 1.467 1.048 Additional cost 3 2.5 Total cost 3.467 3.548Sale value of
Final product
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