Use the information below to answer the following question(s).Beverage Drink Company processes direct materials up to the splitoff point, where two products, A and B, are obtained.The following information was collected for the month of July:
Direct materials processed: 2,500 litres (with 20 percent shrinkage)
Cost of purchasing 2,500 litres of direct materials and processing it up to the splitoff point to yield a total of 2,000 litres of good products was $4,500.There were no inventory balances of A and B.Product A may be processed further to yield 1,375 litres of Product Z5 for an additional processing cost of $150.Product Z5 is sold for $25.00 per litre.There was no beginning inventory and ending inventory was 125 litres.Product B may be processed further to yield 375 litres of Product W3 for an additional processing cost of $275.Product W3 is sold for $30.00 per litre.There was no beginning inventory and ending inventory was 25 litres.
-What are the expected final sales values of production if Product Z5 and Product W3 are produced?
A)$11,250 and $34,375
B)$22,500 and $5,000
C)$31,250 and $10,500
D)$34,375 and $10,500
E)$34,375 and $11,250

Question

Use the information below to answer the following question(s).Beverage Drink Company processes direct materials up to the splitoff point, where two products, A and B, are obtained.The following information was collected for the month of July:
Direct materials processed: 2,500 litres (with 20 percent shrinkage)
  Cost of purchasing 2,500 litres of direct materials and processing it up to the splitoff point to yield a total of 2,000 litres of good products was $4,500.There were no inventory balances of A and B.Product A may be processed further to yield 1,375 litres of Product Z5 for an additional processing cost of $150.Product Z5 is sold for $25.00 per litre.There was no beginning inventory and ending inventory was 125 litres.Product B may be processed further to yield 375 litres of Product W3 for an additional processing cost of $275.Product W3 is sold for $30.00 per litre.There was no beginning inventory and ending inventory was 25 litres.
-What are the expected final sales values of production if Product Z5 and Product W3 are produced?
A)$11,250 and $34,375 
B)$22,500 and $5,000 
C)$31,250 and $10,500 
D)$34,375 and $10,500 
E)$34,375 and $11,250

Quizplus · Accepted Answer

To find the expected final sales values of production if Product Z5 and Product W3 are produced, we need to first calculate the total cost of producing each product.

For Product A:
Direct materials processed = 2,500 L (with 20% shrinkage = 2,000 L of good product A)
Cost per litre of direct materials processed = $4,500/2,500 L = $1.80/L

Cost of producing 1,375 L of Product Z5 = 1,375 L x ($1.80/L + $150/1,375 L) = $2,865
Expected sales revenue from 1,375 L of Product Z5 = 1,375 L x $25/L = $34,375

For Product B:
Direct materials processed = 2,500 L (with 20% shrinkage = 2,000 L of good product B)
Cost per litre of direct materials processed = $4,500/2,500 L = $1.80/L

Cost of producing 375 L of Product W3 = 375 L x ($1.80/L + $275/375 L) = $3,400
Expected sales revenue from 375 L of Product W3 = 375 L x $30/L = $11,250

Therefore, the expected final sales values of production if Product Z5 and Product W3 are produced are $34,375 for Product Z5 and $11,250 for Product W3. The correct answer is E) $34,375 and $11,250.

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