Happy Cow Manufacturing (THC) makes different types of cheeses and related products. Its most famous cheese is
Question:
Happy Cow Manufacturing (THC) makes different types of cheeses and related products. Its most famous cheese is Queso Fresco. To make a pound of Queso Fresco, 5 quarts of milk are required. THC processes the milk in batches of 20,000 quarts. These 20,000 quarts of milk also produce whey, a common food supplement. For every liter, the milk will produce 1.75 pounds of whey. THC pays $1.5 for each gallon of milk. They make one batch a month. Each pound of cheese could sell for $10/lb, and each pound of buttermilk could sell for $1.5/lb.
Note: There are 4 quarts in each gallon.
THC decides to further process the Queso Fresco and make and sell cheese fritters. THC would incur an additional cost to operate the fry station and pay for the ingredients to make the fritters, it would incur a total of $10,000 per month to make this delicious delicacy. For every pound of cheese, they can produce 5 fritters that could be sold as a 4-pack for $12. At the same time, THC will go ahead and further process the whey to produce xanthan gum, a very popular food thickener used primarily in gluten-free flour. There is some loss in the process, so for every pound of whey processed, only 0.75 pounds of gum is obtained. The price per pound of gum is $4 and the THC would incur an additional cost of $5,000 for the process.
Under the NRV method, how much joint cost would be allocated to xanthan gum?
Transportation A Global Supply Chain Perspective
ISBN: 9781337406642
9th Edition
Authors: Robert A. Novack, Brian Gibson, Yoshinori Suzuki, John J. Coyle