FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
10th Edition
ISBN: 9781259964947
Author: Libby
Publisher: MCG
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Martin Chicken Corporation processes and packages chicken for grocery
stores. It purchases chickens from farmers and processes them into two
different products: chicken drumsticks and chicken steak. From a standard
batch of 12,000 pounds of raw chicken that costs $7,000, the company
produces two parts: 2,800 pounds of drumsticks and 4,200 pounds of breast
for a processing cost of $2,450. The chicken breast is further processed into
3,200 pounds of steak for a processing cost of $2,000. The market price of
drumsticks per pound is $1.25 and the market price per pound of chicken
steak is $4.20. If Martin decided to sell chicken breast instead of chicken
steak, the price per pound would be $2.20.
Required:
a-1. Allocate the joint cost to the joint products, drumsticks and breasts, using
weight as the allocation base. (Round "Allocation Rate" to 2 decimal
places and other answers to the nearest dollar amount.)
Allocation
Rate
Weight of
Base
Allocated
Cost
Product
Drumsticks
Chicken
breast
Total
allocated cost
a-2. Calculate the gross margin for each product.
Chicken
Drumsticks
Chicken
Breast
Revenue
Cost of goods
sold
Gross margin
If the drumsticks are producing a loss, should that product line be
a-3.
eliminated?
O Yes
O No
b-1. Reallocate the joint cost to the joint products, drumsticks and breasts,
using relative market values as the allocation base. (Round your
intermediate calculations and final answers to 2 decimal places.)
Total cost of
drumsticks
Total cost of chicken
breasts
expand button
Transcribed Image Text:Martin Chicken Corporation processes and packages chicken for grocery stores. It purchases chickens from farmers and processes them into two different products: chicken drumsticks and chicken steak. From a standard batch of 12,000 pounds of raw chicken that costs $7,000, the company produces two parts: 2,800 pounds of drumsticks and 4,200 pounds of breast for a processing cost of $2,450. The chicken breast is further processed into 3,200 pounds of steak for a processing cost of $2,000. The market price of drumsticks per pound is $1.25 and the market price per pound of chicken steak is $4.20. If Martin decided to sell chicken breast instead of chicken steak, the price per pound would be $2.20. Required: a-1. Allocate the joint cost to the joint products, drumsticks and breasts, using weight as the allocation base. (Round "Allocation Rate" to 2 decimal places and other answers to the nearest dollar amount.) Allocation Rate Weight of Base Allocated Cost Product Drumsticks Chicken breast Total allocated cost a-2. Calculate the gross margin for each product. Chicken Drumsticks Chicken Breast Revenue Cost of goods sold Gross margin If the drumsticks are producing a loss, should that product line be a-3. eliminated? O Yes O No b-1. Reallocate the joint cost to the joint products, drumsticks and breasts, using relative market values as the allocation base. (Round your intermediate calculations and final answers to 2 decimal places.) Total cost of drumsticks Total cost of chicken breasts
If the drumsticks are producing a loss, should that product line be
a-3.
eliminated?
O Yes
O No
b-1. Reallocate the joint cost to the joint products, drumsticks and breasts,
using relative market values as the allocation base. (Round your
intermediate calculations and final answers to 2 decimal places.)
Total cost of
drumsticks
Total cost of chicken
breasts
b-2.Calculate the gross margin for each product. (Round your intermediate
calculations and final answers to 2 decimal places.)
Chicken
Chicken
Breast
Drumsticks
Revenue
Cost of
goods sold
Gross margin
c-1. Should Martin further process chicken breasts into chicken steak? (Use the
assumption made in requirement b-1).
O Yes
O No
c-2. How would the profit be affected by your answer c-1.
Effect on
profit
expand button
Transcribed Image Text:If the drumsticks are producing a loss, should that product line be a-3. eliminated? O Yes O No b-1. Reallocate the joint cost to the joint products, drumsticks and breasts, using relative market values as the allocation base. (Round your intermediate calculations and final answers to 2 decimal places.) Total cost of drumsticks Total cost of chicken breasts b-2.Calculate the gross margin for each product. (Round your intermediate calculations and final answers to 2 decimal places.) Chicken Chicken Breast Drumsticks Revenue Cost of goods sold Gross margin c-1. Should Martin further process chicken breasts into chicken steak? (Use the assumption made in requirement b-1). O Yes O No c-2. How would the profit be affected by your answer c-1. Effect on profit
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