The Alfarm Corporation Processes Raw Milk Up to the Split-Off

question 62

Multiple Choice

The Alfarm Corporation processes raw milk up to the split-off point where two products, cream and liquid skim, are produced and sold. There was no beginning inventory. The following material was collected for the month of February:

The cost of purchasing 780,000 gallons of direct materials and processing it up to the split-off point to yield a total of 758,500 gallons of good product was $2,310,000. When using a physical-volume measure, what is the approximate amount of joint costs that will be allocated to cream and liquid skim? (Round intermediary percentages to the nearest hundredth.)

• A) $1,350,657 and $959,343
• B) $1,155,000 and $1,155,000
• C) $1,345,524 and $964,476
• D) $1,313,442 and $996,558

Recognize the differences in total cost allocation between the step-down and direct methods.

Recognize and apply the calculation of equivalent units of production under FIFO method.

Understand and calculate the cost per equivalent unit for conversion costs in various scenarios.

Identify situations appropriate for the use of process costing over job-order costing.

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Definitions:

Adrenal Medulla

Inner portion of the adrenal gland; secretes the hormones epinephrine and norepinephrine.

Hormones

Chemical substances produced in the body that regulate and control the activity of certain cells or organs, essential for every bodily function.

Olecrannon Process

The bony prominence of the ulna at the elbow, which forms the point of the elbow and connects with the humerus to allow arm extension.

Ulna

A bone in the forearm that runs parallel to the radius, playing a key role in the movement of the elbow and wrist.