Question

1. The Kenton Company processes unprocessed milk to produce two products, Butter Cream and Condensed Milk. The following information was collected for the month of June:

Direct Materials processed: 24,500 gallons (after shrinkage)

Production:	Butter Cream	12,000	gallons
	Condensed Milk	12,500	gallons
Sales:	Butter Cream	11,500	gallons
	Condensed Milk	12,000	gallons
Sales Price:	Butter Cream	$3.50	per gallon
	Condensed Milk	$7.50	per gallon
Separable costs in total:	Butter Cream	$14,000
	Condensed Milk	$34,700

The cost of purchasing the of unprocessed milk and processing it up to the split-off point to yield a total of 24,500 gallons of saleable product was $55,000.

The company uses constant gross-margin percentage NRV method to allocate the joint costs of production. What is the constant gross-margin percent for Kenton?

Select one:

a. 64.1%

b. 20.4%

c. 23.6%

d. 62.6%

2. The challenge of a production facility that is producing several products from is how to allocate the joint costs that are incurred ________.

Select one:

a. before the split-off point

b. after the split-off point

c. at the split-off point

d. at the end of production

3. Which of the following formulas would calculate the net realizable value of a product?

Select one:

a. sales value at the split-off point less cost to produce up to the split-off point

b. sales value x constant gross-margin

c. final sales value minus cost of goods sold

d. final sales value minus separable costs

4. Which of the following best describes how the constant gross-margin percentage NRV method allocates joint costs?

Select one:

a. a gross margin is calculated and for each product and then the gross margin is deducted along with separable costs from the final sales value of a product to derive the joint cost allocation for a product

b. an overall gross margin is calculated and for each product and then the gross margin is deducted along with separable costs from the final sales value of a all the products produced in the joint processing and the allocations are then made based on physical volume measures

c. an overall gross margin is calculated and for each product the gross margin is deducted along with separable costs from the final sales value of a product to derive the joint cost allocation for the product

d. a gross margin is calculated and for each product and then gross margin is deducted along from the final sales value of a product to derive the joint cost allocation for a product.

Answer 1

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Question 1		Butter Cream	Condensed Milk	Total
Sales	11500*3.5	$           40,250	$                 90,000	$       130,250
	12000*7.5
Less: Joint Cost				$         55,000
Less: Seperable Cost		$           14,000	$                 34,700	$         48,700
Gross Margin				$         26,550
Constant Gross Margin %	26550/130250			20.4%
Correst Answer is B.
Question 2
a. before the split-off point
Question 3
d. final sales value minus separable costs
Question 4
c. an overall gross margin is calculated and for each product the gross margin is deducted along with separable costs from the final sales value of a product to derive the joint cost allocation for the product