Answer the Following Questions Using the Information Below:
the Green $\text { Direct Materials processed: } \quad 98,000 \text { gallons (after shrinkage) }$

question 40

Multiple Choice

Answer the following questions using the information below:
The Green Company processes unprocessed goat milk up to the splitoff point where two products, condensed goat milk and skim goat milk result. The following information was collected for the month of October:
$\text { Direct Materials processed: } \quad 98,000 \text { gallons (after shrinkage) }$
$\begin{array}{lll}\text { Proauction: } & \text { Condensed goat milk } & 42,500 \text { gallons } \\& \text { Skim goat milk } & 55,500 \text { gallons } \\\text { Sales: } & \text { Condensed goat milk } & \$ 3.50 \text { per gallon } \\&\text { skim goat milk } & \$ 2.50 \text { per gallon }\end{array}$ The costs of purchasing the of unprocessed goat milk and processing it up to the splitoff point to yield a total of 98,000 gallons of saleable product was $184,480. There were no inventory balances of either product.
Condensed goat milk may be processed further to yield 42,000 gallons (the remainder is shrinkage) of a medicinal milk product, Xyla, for an additional processing cost of $4 per usable gallon. Xyla can be sold for $20 per gallon.
Skim goat milk can be processed further to yield 54,200 gallons of skim goat ice cream, for an additional processing cost per usable gallon of $4. The product can be sold for $9 per gallon.
There are no beginning and ending inventory balances.
-How much (if any) extra income would Green earn if it produced and sold skim milk ice cream from goats rather than goat skim milk? Allocate joint processing costs based upon the relative sales value at the splitoff point.

• A) $132,250
• B) $576,552
• C) $523,250
• D) $181,968

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Definitions:

Initial Outlay

The initial investment amount or the upfront cost required to start a project or investment.

Sunk Cost

A cost associated with a project expended prior to making the decision to undertake that project (for example, the cost of research into the idea). Since sunk funds are already gone, they cannot alter future costs or benefits, and should not be included in the analysis leading to a decision.

Opportunity Cost

The benefit foregone by using an asset in a particular way. Usually the income or benefit it would produce in its next best use.

Cash Outflow

Money going out of a business or individual's account, typically to pay for expenses, investments, or acquisitions.