Question

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.)

	A.	$35,600
	B.	$19,428
	C.	$33,580
	D.	$13,000

Answer 1

The correct option is (B) $ 19,428 Sales value (12,500*4.5) $ Gross margin @42.35% ( NOTE 1) $ Total production costs Separable costs Butter Milk Condensed milk | Total 56,250 $ 120,000 $ 176,250 23,822 32,428 13,000 19,428 Joint costs allocated Note 1 Gross margin percentage = (176,250-53,000-35,600-13,000)/176,250 = 42.35%