The Kenton Company processes unprocessed milk to produce two products, Butter Cream and Condensed Milk. The...

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: 27,500 gallons (after shrinkage)

Production:	Butter Cream	12,500	gallons
	Condensed Milk	15,000	gallons
Sales:	Butter Cream	12,000	gallons
	Condensed Milk	14,500	gallons
Sales Price:	Butter Cream	$4.50	per gallon
	Condensed Milk	$8.00	per gallon
Separable costs in total:	Butter Cream	$13,000
	Condensed Milk	$35,600

The cost of purchasing the of unprocessed milk and processing it up to the split-off point to yield a total of 27,500 gallons of saleable product was $53,000.

The company uses constant gross-margin percentage NRV method to allocate the joint costs of production. What is the allocated joint costs of Butter Cream? (Round intermediary percentages to the nearest hundredth.)

Select one:

a. $33,580

b. $13,000

c. $35,600

d. $19,428

Expert Solution

	The correct option is (d) i.e. $19,428 which is calculated as below:-

		Butter Milk	Condensed milk	Total
	Sales value (12,500*4.5)	56,250	120,000	176,250
Note 1	Gross margin @42.35%	23,822
	Total production costs	32,428
	Separable costs	13,000
	Joint costs allocated	19,428

Note 1	Gross margin percentage = (176,250-53,000-35,600-13,000)/176,250 = 42.35%

ekkarill92 answered 2 years ago

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