Answer the Following Questions Using the Information Below:
the Alfarm

question 69

Multiple Choice

Answer the following questions using the information below:
The Alfarm Corporation processes raw milk up to the splitoff 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:
$\begin{array}{lll}\text { Direct materials processed: } && 750,000 \text { gallons }(727,500 \text { gallons of good product) } \\\text { Production: } & \text { Cream } & 442,500 \text { gallons } \\& \text { Liquid skim } & 285,000 \text { gallons } \\\text { Sales: } & \text { Cream } & 421,500 \text { at } \$ 110 \text { per gallon } \\& \text { Liquid skm } & 273,000 \text { at } \$ 100 \text { per gallon }\end{array}$ The cost of purchasing 750,000 gallons of direct materials and processing it up to the splitoff point to yield a total of 727,500 gallons of good product was $2,280,000.
-Which of the following statements about Alfarm's joint production costs is true?

• A) The gross-margin percentage per gallon of Cream and Liquid skim are equal because joint costs are allocated based on the number of gallons.
• B) The gross-margin percentage per gallon of Cream is higher than gross margin percentage per gallon of Liquid skim because of Cream's higher production volume.
• C) The joint production cost per gallon of Cream and Liquid skim are equal because joint costs are allocated based on the number of gallons.
• D) The joint production cost per gallon of Cream is higher than joint production cost per gallon of Liquid skim because of Cream's higher production volume.

Analyze product profitability based on resource utilization and make decisions on product prioritization.

Calculate the financial advantage or disadvantage of further processing intermediate products into end products.

Apply the concept of joint processing costs and allocate them to joint products.

Understand the absorption costing approach to cost-plus pricing.

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Definitions:

Aquatic Organisms

Living beings that inhabit water environments, ranging from freshwater to marine ecosystems.

Decomposition

The process by which organic substances are broken down into simpler forms of matter, often involving the action of bacteria and fungi.

Primary Producers

Organisms, usually plants and algae, that can produce their own food through photosynthesis, forming the base of the food web.