The Alfarm Corporation processes raw milk up to the split$-$off point where two products, cream and liquid skim, are produced and sold. There was no beginning inventory. The following material was collected for the month of February:

Direct materials processed:$840,000$gallons $(817,500$ gallons of good product$)$Production:Cream$442,500$gallons$$Liquid skim$375,000$gallonsSales:Cream$424,500$at $$2\mathrm{.}50$ per gallon$$Liquid skim$366,000$at $$2\mathrm{.}30$ per gallon

The cost of purchasing $840,000$ gallons of direct materials and processing it up to the split$-$off point to yield a total of $817,500$ gallons of good product was $$1,020,000.$ Which of the following statements about Alfarm's joint production costs is true?

Question $40$ options:

The gross$-$margin percentage per gallon of Cream is higher than gross margin percentage per gallon of Liquid skim because of Cream's higher production volume.

The joint production cost per gallon of Cream and Liquid skim are equal because joint costs are allocated based on the number of gallons.

The joint production cost per gallon of Cream is higher than joint production cost per gallon of Liquid skim because of Cream's higher production volume.

The gross$-$margin percentage per gallon of Cream and Liquid skim are equal because joint costs are allocated based on the number of gallons.