Posted: July 14th, 2016

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

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 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

3) Using estimated net realizable value, what amount of the joint costs would be allocated to Xyla and to the skim goat ice cream?
A) \$83,942 and \$60,538
B) \$88,942 and \$55,538
C) \$65,592 and \$78,888
D) \$144,480 and \$72,140

4) Using the sales value at splitoff method, what is the gross-margin percentage for condensed goat milk at the splitoff point?
A) 21.1%
B) 55.1%
C) 58.1%
D) 38.2%

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