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Borden Milk Company processes raw milk in Department A from which come two main products, Butter and Yogurt, and a by-product, Buttermilk. Butter is further
Borden Milk Company processes raw milk in Department A from which come two main products, Butter and Yogurt, and a by-product, Buttermilk. Butter is further processed in Department B, Yogurt in Department C, and Buttermilk in Department D. The value of the by- product reduces the cost of the main products, and sales value is used to allocate joint costs. Dept $90,000 Dept B $10,000 Dept C $8,000 Dept D $10,000 Cost Incurred: Production: Butter Yogurt 10,000 lbs. 20,000 lbs. 10,000 1bs. Buttermilk Selling Price: Butter Yogurt Buttermilk $10/1b $5/1b. $2/1b Required: a. Compute unit costs for Butter and Yogurt. b. Ending inventory consists of 5,000 lbs. of Yogurt and 1,000 lbs. of Buttermilk. What is the value of the inventory? c. Recompute requirements a and b allocating cost based on net realizable value
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