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Question(s) / Instruction(s):

A dairy allocates the cost of unprocessed milk to the production of milk, cream, butter and cheese. For the current period, unprocessed milk was purchased for $240,000, and the following quantities of product and sales revenues were produced.

Products              Pounds                                 Price per pound                               

Milk                       100,000                                 $0.90                   

Cheese                 50,000                                   $2.20                   

Butter                   20,000                                 $1.00                      

Cream                  10,000                                   $3.00

How much of the $240,000 cost should be allocated to milk?

a)            $133,333

b)            $0

c)            $240,000

d)            $86,400

e)            $90,000

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