Answer the following question(s)using the information below:
The Morton Company processes unprocessed goat milk up to the splitoff point where two products, condensed goat milk and skim goat milk result.The following information was collected for the month of October: The costs of purchasing the 65,000 litres of unprocessed goat milk and processing it up to the splitoff point to yield a total of 58,500 litres of salable product was $72,240.There were no inventory balances of either product.Condensed goat milk may be processed further to yield 19,500 litres (the remainder is shrinkage)of a medicinal milk product, Xyla, for an additional processing cost of $3 per usable litre.Xyla can be sold for $18 per litre.Skim goat milk can be processed further to yield 28,100 litres of skim goat ice cream, for an additional processing cost per usable litre of $2.50.The product can be sold for $9 per litre.There are no beginning and ending inventory balances.
-Using estimated net realizable value, what amount of the $72,240 of joint costs would be allocated Xyla and the skim goat ice cream?
A)$41,971 and $30,269
B)$44,471 and $27,769
C)$32,796 and $39,444
D)$36,120 and $36,120
E)$39,444 and $32,796

Question

Answer the following question(s)using the information below:
The Morton Company processes unprocessed goat milk up to the splitoff point where two products, condensed goat milk and skim goat milk result.The following information was collected for the month of October:   The costs of purchasing the 65,000 litres of unprocessed goat milk and processing it up to the splitoff point to yield a total of 58,500 litres of salable product was $72,240.There were no inventory balances of either product.Condensed goat milk may be processed further to yield 19,500 litres (the remainder is shrinkage)of a medicinal milk product, Xyla, for an additional processing cost of $3 per usable litre.Xyla can be sold for $18 per litre.Skim goat milk can be processed further to yield 28,100 litres of skim goat ice cream, for an additional processing cost per usable litre of $2.50.The product can be sold for $9 per litre.There are no beginning and ending inventory balances.
-Using estimated net realizable value, what amount of the $72,240 of joint costs would be allocated Xyla and the skim goat ice cream?
A)$41,971 and $30,269 
B)$44,471 and $27,769 
C)$32,796 and $39,444 
D)$36,120 and $36,120 
E)$39,444 and $32,796

Quizplus · Accepted Answer

The estimated net realizable value for Condensed goat milk (which can be further processed to Xyla) would be calculated as follows:
- 19,500 litres of Xyla can be produced from 19,500 / 58,500 x $72,240 = $24,080 of joint costs
- The additional processing cost for Xyla is $3 per usable litre, so the total cost of producing 19,500 litres of Xyla would be $24,080 + (19,500 x $3) = $81,080
- The net realizable value of 19,500 litres of Xyla would be 19,500 x $18 = $351,000
- Therefore, the estimated net realizable value of Xyla would be $351,000 - $81,080 = $269,920

The estimated net realizable value for Skim goat milk (which can be further processed to skim goat ice cream) would be calculated as follows:
- 28,100 litres of skim goat ice cream can be produced from 28,100 / 58,500 x $72,240 = $34,568 of joint costs
- The additional processing cost for skim goat ice cream is $2.50 per usable litre, so the total cost of producing 28,100 litres of skim goat ice cream would be $34,568 + (28,100 x $2.50) = $102,318
- The net realizable value of 28,100 litres of skim goat ice cream would be 28,100 x $9 = $253,900
- Therefore, the estimated net realizable value of skim goat ice cream would be $253,900 - $102,318 = $151,582

Therefore, the amount of joint costs allocated to Xyla and skim goat ice cream based on estimated net realizable value would be $269,920 for Xyla and $151,582 for skim goat ice cream, which corresponds to answer choice B.

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