The Brital Company processes unprocessed milk to produce two products, Butter Cream and Condensed Milk. The following information was collected for the month of June:
| Direct Materials processed: | 33,000 gallons |
| Production: | Butter Cream | 13,000 | gallons |
| | Condensed Milk | 20,000 | gallons |
| Sales: | Butter Cream | 12,500 | gallons |
| | Condensed Milk | 19,500 | gallons |
| Sales: | Butter Cream | $2.50 | per gallon |
| | Condensed Milk | $9.00 | per gallon |
| Separable costs in total: | Butter Cream | $14,500 | |
| | Condensed Milk | $36,000 | |
The costs of purchasing the of unprocessed milk and processing it up to the split-off point to yield a total of 33,000 gallons of saleable product was $55,000.
The company uses constant gross-margin percentage NRV method to allocate the joint costs of production. Which of the following statements is true of Brital?
◦ The gross profit percent of condensed milk is lower than the gross profit of butter cream.
◦ The gross margin is same for both products because constant gross margin percentage NRV method ignores profits earned before the split-off point.
◦ The gross profit of condensed milk is lower than the gross profit of butter cream.
◦ The gross margin is allocated to the joint products in order to determine the joint-cost allocations.
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