The Alfarm Corporation Processes Raw Milk Up to the Split-Off

question 3

Multiple Choice

The Alfarm Corporation processes raw milk up to the split-off 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:

The cost of purchasing 800,000 gallons of direct materials and processing it up to the split-off point to yield a total of 778,500 gallons of good product was $2,350,000.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.

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