UNIT 4 — MILESTONE 4: Milestone
19/23
19/23 suven [ nerare |
() 19 questions were answered correctly.
4 questions were answered incorrectly.
T @
Ligo Dairy Farm sells milk for $2.50 per gallon. Ligo Dairy wants
to investigate if it would be financially wise to further process
their milk to make butter, which they could sell for $3.75 per
pound. Ligo’s batch sizes are 1,000 gallons of milk, which will
make 400 pounds of butter. The total cost of producing the milk
is $750 and the total cost of manufacturing the butter is $900.
Should Ligo sell milk or process it further to sell butter, and
why?
Ligo Dairy should sell milk. They
o will incur a loss of $1,150 if they
sell butter.
Ligo Dairy should sell butter.
They will make an additional
O profit of $1,500 per batch.
Ligo Dairy should sell butter.
O They will make an additional
profit of $600 per batch.
Ligo Dairy should sell milk. They
will incur a loss of $1,750 if they
, UNIT 4 — MILESTONE 4: Milestone
19/23
Step 1. Find Differential Cost per batch of manufacturing butter
= Cost of producing butter $900 — Cost of producing milk
$750. $900 - $750 = $150
Step 2: Determine Revenue earned per batch from milk =
$2.50 per gallon x 1,000 gallons per batch. $2.50 x 1000 =
$2,500
Step 3: Calculate Revenue earned per batch from butter =
$3.75 per pound x 400 pounds per batch. $3.75 x 400 = $1,500
Step 4. Find Differential revenue per batch of butter = Revenue
earned per batch from butter $1,500 — Revenue earned per
batch from milk $2,500. $1,500 — $2,500 = ($1,000
Step b: Calculate Differential Profit (loss) from butter =
Differential revenue per batch of manufacturing butter ($1,000)
— Differential Cost per batch of manufacturing butter $150.
($1,000) — $150 = ($1,150)
CONCEPT
— Process or Sell and Accept or Reject Decisions
Report an issue with this question
- O
The Great Falls Cheese Company wants to determine how well
it estimated its Direct Material costs by comparing the
standards it predicted to actual data. Great Falls has the
following standards: Standard Quantity per unit: 1.25 gallons of
milk per pound of cheese, Standard Price per unit: $2.50 per
gallon of milk. During the month of October, 24,000 pounds of
cheese were produced, using a total of 28,800 gallons of milk
at a total cost of $70,560.
, UNIT 4 — MILESTONE 4: Milestone
19/23
$2,575 Unfavorable
O
$3,000 Unfavorable
O
$4.400 Favorable
O
$1,440 Favorable
© O
RATIONALE
Step 1: Find Actual Direct Material Used = 28,800 (Actual
Quantity) X $2.50 per gallon (Standard Price). 28,800 X $2.50
=$72,000.
Step 2: Determine Actual Direct Material Cost = 28,800 gallons
(Actual Quantity of Raw Material Used) X $2.45 (Actual Price
Paid per Unit: $70,560 + 28,800 gallons). 28,800 X $2.45 =
$70,560.
Step 3: Calculate Direct Material Price Variance = $70,560
(Actual Direct Material Cost) — $72,000 (Actual Direct Materials
Used). $70,560 — $72,000 = —$1,440.
The Actual Direct Material Cost is less than the predicted
Actual Direct Material Used: therefore, the variance is
favorable.
CONCEPT
— Standard Costing and Variances
19/23
19/23 suven [ nerare |
() 19 questions were answered correctly.
4 questions were answered incorrectly.
T @
Ligo Dairy Farm sells milk for $2.50 per gallon. Ligo Dairy wants
to investigate if it would be financially wise to further process
their milk to make butter, which they could sell for $3.75 per
pound. Ligo’s batch sizes are 1,000 gallons of milk, which will
make 400 pounds of butter. The total cost of producing the milk
is $750 and the total cost of manufacturing the butter is $900.
Should Ligo sell milk or process it further to sell butter, and
why?
Ligo Dairy should sell milk. They
o will incur a loss of $1,150 if they
sell butter.
Ligo Dairy should sell butter.
They will make an additional
O profit of $1,500 per batch.
Ligo Dairy should sell butter.
O They will make an additional
profit of $600 per batch.
Ligo Dairy should sell milk. They
will incur a loss of $1,750 if they
, UNIT 4 — MILESTONE 4: Milestone
19/23
Step 1. Find Differential Cost per batch of manufacturing butter
= Cost of producing butter $900 — Cost of producing milk
$750. $900 - $750 = $150
Step 2: Determine Revenue earned per batch from milk =
$2.50 per gallon x 1,000 gallons per batch. $2.50 x 1000 =
$2,500
Step 3: Calculate Revenue earned per batch from butter =
$3.75 per pound x 400 pounds per batch. $3.75 x 400 = $1,500
Step 4. Find Differential revenue per batch of butter = Revenue
earned per batch from butter $1,500 — Revenue earned per
batch from milk $2,500. $1,500 — $2,500 = ($1,000
Step b: Calculate Differential Profit (loss) from butter =
Differential revenue per batch of manufacturing butter ($1,000)
— Differential Cost per batch of manufacturing butter $150.
($1,000) — $150 = ($1,150)
CONCEPT
— Process or Sell and Accept or Reject Decisions
Report an issue with this question
- O
The Great Falls Cheese Company wants to determine how well
it estimated its Direct Material costs by comparing the
standards it predicted to actual data. Great Falls has the
following standards: Standard Quantity per unit: 1.25 gallons of
milk per pound of cheese, Standard Price per unit: $2.50 per
gallon of milk. During the month of October, 24,000 pounds of
cheese were produced, using a total of 28,800 gallons of milk
at a total cost of $70,560.
, UNIT 4 — MILESTONE 4: Milestone
19/23
$2,575 Unfavorable
O
$3,000 Unfavorable
O
$4.400 Favorable
O
$1,440 Favorable
© O
RATIONALE
Step 1: Find Actual Direct Material Used = 28,800 (Actual
Quantity) X $2.50 per gallon (Standard Price). 28,800 X $2.50
=$72,000.
Step 2: Determine Actual Direct Material Cost = 28,800 gallons
(Actual Quantity of Raw Material Used) X $2.45 (Actual Price
Paid per Unit: $70,560 + 28,800 gallons). 28,800 X $2.45 =
$70,560.
Step 3: Calculate Direct Material Price Variance = $70,560
(Actual Direct Material Cost) — $72,000 (Actual Direct Materials
Used). $70,560 — $72,000 = —$1,440.
The Actual Direct Material Cost is less than the predicted
Actual Direct Material Used: therefore, the variance is
favorable.
CONCEPT
— Standard Costing and Variances
