Hal, Dal, & Stal Dairy Farmers, Inc., produces whole milk, 2% milk, and cream. The joint cost of producing these three products is $4,000. The split-off quantities of each product are 3,500 gallons of whole milk, 1,500 gallons of 2% milk, and 500 gallons of cream. The company can sell whole milk and cream at the split-off point, but 2% milk must be processed further before being sold. Whole milk and cream sell for $2.00 per gallon and $3.00 per gallon, respectively, at the split-off point. Although 2% milk requires further processing to be sold, management estimates a market value of $1.00 per gallon for 2% milk at the split-off point. Using the market value at split-off method, determine the amount of the total joint cost to be allocated to each product.
Hal, Dal, & Stal Dairy Farmers, Inc., produces whole milk, 2% milk, and cream. The joint cost of
producing these three products is $4,000. The split-off quantities of each product are 3,500 gallons
of whole milk, 1,500 gallons of 2% milk, and 500 gallons of cream. The company can sell whole
milk and cream at the split-off point, but 2% milk must be processed further before being sold.
Whole milk and cream sell for $2.00 per gallon and $3.00 per gallon, respectively, at the split-off
point. Although 2% milk requires further processing to be sold, management estimates a market
value of $1.00 per gallon for 2% milk at the split-off point. Using the market value at split-off
method, determine the amount of the total joint cost to be allocated to each product.
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