A Dairy Allocates the Cost of Unprocessed Milk to the Production

question 121

Multiple Choice

A dairy allocates the cost of unprocessed milk to the production of milk,cream,butter and cheese.For the current period,unprocessed milk was purchased for $240,000,and the following quantities of product and sales revenues were produced.
$\begin{array}{lrr}&&\text {Price per}\\\text {Product}&\text {Pounds}&\text {Pound}\\\text { Milk } & 100,000 & \$ 0.90 \\\text { Cheese } & 50,000 & 2.20 \\\text { Butter } & 20,000 & 1.00 \\\text { Cream } & 10,000 & 3.00\end{array}$
How much of the $240,000 cost should be allocated to milk?

• A) $0
• B) $86,400
• C) $90,000
• D) $133,333
• E) $240,000

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Definitions:

Intoxicant

A substance that causes excitement or diminished control over faculties, typically by means of alcohol or drugs.

Production Function

An equation representing the relationship between inputs used in production and the output produced from these inputs.

Labor

The physical and mental effort used in the production of goods and services, often considered a primary factor of production.

Machines

Tools or devices designed to perform specific tasks or functions, often powered by electricity or mechanical force.