Natural Milk Products refines raw milk into cream and liquid skim. Joint costs incurred during the month of April were $2,600,000. Cream requires further processing to be marketable and hence a further processing cost of $300,000 was incurred. Liquid skim also requires further processing to be marketable and hence a further processing cost of $100,000 was incurred. Cream was sold at $10 per gallon and liquid skim at $4.00 per gallon. During the month of April, 200,000 gallons of cream and 800,000 gallons of liquid skim were processed.
Required:
What is the production cost per gallon of cream for the month of April using the NRV method?
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