Reference no: EM132462203

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:

Direct materials processed

106,000 gallons (after shrinkage)

Production

Condensed goat milk : 46,000 gallons

Skim goat milk : 60,000 gallons

Sales

Condesned milk : $3.75 per gallon

Skim goat milk : $275 per gallon

• The costs of purchasing the of unprocessed goat milk and processing it up to the splitoff point to yield a total of 106,000 gallons of saleable product was $190,480. There were no inventory balances of either product. Condensed goat milk may be processed further to yield 45,500 gallons (the remainder is shrinkage) of a medicinal milk product, Xyla, for an additional processing cost of $6 per usable gallon. Xyla can be sold for $20 per gallon.

• Skim goat milk can be processed further to yield 58,700 gallons of skim goat ice cream, for an additional processing cost per usable gallon of $6. The product can be sold for $12 per gallon.

There are no beginning and ending inventory balances.

Question 1: How much (if any) extra income would Green earn if it produced and sold all of the Xyla from the condensed goat milk? Allocate joint processing costs based upon relative sales value on the splitoff. (Extra income means income in excess of what Green would have earned from selling condensed goat milk.)

a. $539, 644

b. $ 259, 076

c. $ 187,200

d. $108,000