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

question 116

Multiple Choice

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

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Definitions:

Marginal Propensity To Save

The fraction of an increase in income that is saved rather than spent on consumption.

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Times characterized by a significant decline in economic activity across the economy, lasting more than a few months, typically visible in real GDP, real income, employment, industrial production, and wholesale-retail sales.

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The income that is gained by governments through taxation, which is used to fund public services and government obligations.

National Income

The total amount of money earned within a country from the production of goods and services over a specific period of time.