Posted: April 19th, 2016

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%

5) Using the sales value at splitoff method, what is the gross-margin percentage for skim goat milk at the splitoff point?

A) 21.1%

B) 55.1%

C) 58.1%

D) 38.2%

6) How much (if any) extra income would Morton earn if it produced and sold all of the Xyla from the condensed goat milk? Allocate joint processing costs based upon relative sales value on the splitoff. (Extra income means income in excess of what Morton would have earned from selling condensed goat milk.)

A) $106,126

B) $508,426

C) $402,300

D) $193,574

D) $140,500

Problem 5

Book & Bible Bookstore desires to buy a new coding machine to help control book inventories. The machine sells for $36,586 and requires working capital of $4,000. Its estimated useful life is five years and will have a salvage value of $4,000. Recovery of working capital will be $4,000 at the end of its useful life. Annual cash savings from the purchase of the machine will be $10,000.

Required:

a. Compute the net present value at a 14% required rate of return.

b. Compute the internal rate of return.

c. Determine the payback period of the investment.

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