Cola Drink Company processes direct materials up to the split-off point where two products,A and B,are obtained.The following information was collected for the month of July:

The cost of purchasing 3500 liters of direct materials and processing it up to the split-off point to yield a total of 2975 liters of good products was $7000.There were no inventory balances of A and B.
Product A may be processed further to yield 2000 liters of Product Z5 for an additional processing cost of $160.Product Z5 is sold for $60.00 per liter.There was no beginning inventory and ending inventory was 125 liters.
Product B may be processed further to yield 800 liters of Product W3 for an additional processing cost of $290.Product W3 is sold for $65 per liter.There was no beginning inventory and ending inventory was 25 liters.
What is Product Z5's estimated net realizable value at the split-off point?
A)$51,840
B)$83,840
C)$119,840
D)$120,000

Question

Cola Drink Company processes direct materials up to the split-off point where two products,A and B,are obtained.The following information was collected for the month of July:

The cost of purchasing 3500 liters of direct materials and processing it up to the split-off point to yield a total of 2975 liters of good products was $7000.There were no inventory balances of A and B.
Product A may be processed further to yield 2000 liters of Product Z5 for an additional processing cost of $160.Product Z5 is sold for $60.00 per liter.There was no beginning inventory and ending inventory was 125 liters.
Product B may be processed further to yield 800 liters of Product W3 for an additional processing cost of $290.Product W3 is sold for $65 per liter.There was no beginning inventory and ending inventory was 25 liters.
What is Product Z5's estimated net realizable value at the split-off point?
A)$51,840 
B)$83,840 
C)$119,840 
D)$120,000

Quizplus · Accepted Answer

2000 × $60 = $120,000;$120,000 - $160 = $119,840

Cola Drink Company Processes Direct Materials Up to the Split-Off