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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