The Gows Company processes unprocessed goat milk up to the splitoff point where

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:

Direct Materials processed: Production:

Sales:

130,000 gallons (shrinkage was 10%)

condensed goat milk skim goat milk

condensed goat milk skim goat milk

52,200 gallons 64,800 gallons

$3.50 per gallon $2.50 per gallon

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 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.

Assume Sales value at splitoff method is used for allocating joint cost, calculate the gross margin of Xyla and skim goat ice cream respectively.

Assume NRV method is used for allocating joint cost, calculate the gross margin of Xyla and skim goat ice cream respectively

Explanation / Answer

Dear Student,       There no clarity in question regarding raw material and production. So I am going to solve the question based on some assumptions. Particulars Xyla Skim goat ice cream TOTAL Sales 702000 505800 1207800 Joint Cost 284322 204858 489180 Further Processing cost 130500 162000 Gross profit 287178 138942 Note : Computation of total joint cost: Raw material of condensed goat milk 182700 Raw material of skimmed goat milk 162000 processed cost 144480 Joint Cost 489180 xyla joint cost = 489180/1207800*702000 =        2,84,322 skim goat icecream = 489180/1207800*505800        2,04,858

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