Britneys Butters receives 2,000,000 containers of raw milk each period that it subsequently processes into consumable milk

Question:

Britney’s Butters receives 2,000,000 containers of raw milk each period that it subsequently processes into consumable milk by adjusting the fat content, adding vitamins, and destroying any potentially harmful bacteria. For Britney’s, one container equals one gallon of consumable milk. Britney’s then must decide whether to sell its consumable milk at split-off or to process it further into butter. Britney’s normally sells consumable milk for a per-gallon price of $3.50. Alternately, each gallon of milk can be processed further into a tub of butter (all calculations use 1 gallon of milk equals 0.75 gallons of butter) at an additional cost of $3.00 per tub of butter. Also, butter can be sold for $7.00 per tub.


Required:
1. What is the contribution to income from selling the consumable milk?
2. What is the contribution to income from processing the consumable milk into butter?
3. Should Britney’s continue to sell the consumable milk or process it further into butter?

Fantastic news! We've Found the answer you've been seeking!

Step by Step Answer:

Related Book For  book-img-for-question

Managerial Accounting The Cornerstone Of Business Decision Making

ISBN: 9780357715345

8th Edition

Authors: Maryanne M. Mowen, Don R. Hansen, Dan L. Heitger

Question Posted: