Author Question: Cola Drink Company processes direct materials up to the split-off point where two products, A and B, ... (Read 113 times)

tingc95 · **on:** Mar 6, 2021

Cola Drink Company processes direct materials up to the split-off point where two products, A and B, are obtained. The following information was collected for the month of July:

Direct materials processed:

3500 liters (with 15% shrinkage)

Production:

A

2100 liters

B	875 liters

Sales:

A

$40.00 per liter

B	$35.00 per liter

The cost of purchasing 3500 liters of direct materials and processing it up to the split-off point to yield a total of 2975 liters of good products was $7000. There were no inventory balances of A and B.

Product A may be processed further to yield 2000 liters of Product Z5 for an additional processing cost of $160. Product Z5 is sold for $60.00 per liter. There was no beginning inventory and ending inventory was 125 liters.

Product B may be processed further to yield 800 liters of Product W3 for an additional processing cost of $290. Product W3 is sold for $65 per liter. There was no beginning inventory and ending inventory was 25 liters.

What is Product Z5's estimated net realizable value at the split-off point?
◦ $51,840
◦ $83,840
◦ $119,840
◦ $120,000

mjenn52 · **Reply #1 on:** Mar 6, 2021

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