Posted: April 23rd, 2016

# What is the estimated net realizable value of the skim goat ice cream at the split off point?

Blaster Drive-In is a fast-food restaurant that sells burgers and hot dogs in a 1950s environment. The fixed operating costs of the company are \$5,000 per month. The controlling shareholder interested in product profitability and pricing, wants all costs allocated to either the burgers or the hot dogs. The following information is provided for the operations of the company:

Burgers Hot Dogs
Sales for January 4,000 2,400
Sales for February 6,400 2,400

Required:
What amount of fixed operating costs is assigned to the burgers and hot dogs when actual sales are used as the allocation base for January? For February?

Problem 4 (six multiple choice parts)
Answer the following questions using the information below:
Just post the letter of the answer that you believe is correct

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: 130,000 gallons (shrinkage was 10%)

Production: condensed goat milk 52,200 gallons
skim goat milk 64,800 gallons

Sales: condensed goat milk .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 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.
1.) What is the estimated net realizable value of Xyla at the splitoff point?
A) \$365,300
B) \$505,800
C) \$585,000
D) \$702,000

2) What is the estimated net realizable value of the skim goat ice cream at the splitoff point?
A) \$365,300
B) \$505,800
C) \$220,400
D) \$170,900

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