Reference no: EM132548510

The Morton 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: 65,000 gallons (shrinkage was 10%)

Production: condensed goat milk 26,100 gallons skim goat milk 32,400 gallons

Sales: condensed goat milk $3.50 per gallon skim goat milk $2.50 per gallon

• The costs of purchasing the 65,000 gallons of unprocessed goat milk and processing it up to the split off point to yield a total of 58,500 gallons of salable product was $72,240. There were no inventory balances of either product.

• Condensed goat milk may be processed further to yield 19,500 gallons (the remainder is shrinkage) of a medicinal milk product, Xyla, for an additional processing cost of $3 per usable gallon. Xyla can be sold for $18 per gallon.

• Skim goat milk can be processed further to yield 28,100 gallons of skim goat ice cream, for an additional processing cost per usable gallon of $2.50. The product can be sold for $9 per gallon.

• There are no beginning and ending inventory balances.

Question 1: solve using the constant gross margin method