The Green Company Processes Unprocessed Goat Milk Up to the Split-Off

question 124

Multiple Choice

The Green Company processes unprocessed goat milk up to the split-off 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 of unprocessed goat milk and processing it up to the split-off point to yield a total of 105,000 gallons of saleable product was $191,480. There were no inventory balances of either product. Condensed goat milk may be processed further to yield 45,000 gallons (the remainder is shrinkage) of a medicinal milk product, Xyla, for an additional processing cost of $5 per usable gallon. Xyla can be sold for $20 per gallon.
Skim goat milk can be processed further to yield 58,200 gallons of skim goat ice cream, for an additional processing cost per usable gallon of $5. The product can be sold for $12 per gallon.
There are no beginning and ending inventory balances.
Using the sales value at split-off method, what is the gross-margin percentage for skim goat milk at the split-off point? (Round intermediary percentages to the nearest hundredth.)

• A) 46.25%
• B) 50.00%
• C) 56.75%
• D) 53.75%

---

Definitions:

Sales Revenues

The revenue a company earns from selling products or offering services.

Cost of Goods Sold

The direct costs attributable to the production of goods sold by a company, including the cost of materials and labor.

Production Levels

The quantity of goods or services produced within a specified period, often measured in units, volume, or output.

Per Unit Cost

The average cost associated with producing or acquiring one unit of a product or service.