Problem 4-24A (Algo) Allocating joint product cost LO 4-4 Stuart 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 17,000 pounds of raw chicken that costs $9,250, the company produces two parts: 3,400 pounds of drumsticks and 5,700 pounds of breast for a processing cost of $6,502. The chicken breast is further processed into 4,900 pounds of steak for a processing cost of $2,900. The market price of drumsticks per pound is $1.60 and the market price per pound of chicken steak is $4.90. If Stuart decided to sell chicken breast instead of chicken steak, the price per pound would be $2.50. Required a-1. Allocate the joint cost to the joint products, drumsticks and breasts, using weight as the allocation base. a-2. Calculate the gross profit for each product. a-3. If the drumsticks are producing a loss, should that product line be eliminated? b-1. Reallocate the joint cost to the joint products, drumsticks and breasts, using relative market values as the allocation base. b-2. Calculate the gross profit for each product. c-1. Should Martin further process chicken breasts into chicken steak? (Use the assumption made in requirement b-1). c-2. How would the profit be affected by your answer in c-1? Complete this question by entering your answers in the tabs below. Req A1 Req A2 Product Drumsticks Chicken breast Total allocated cost Req A3 Req B1 Allocation Rate x Weight of Base X Allocate the joint cost to the joint products, drumsticks and breasts, using weight as the allocation base. (Round "Allocation rate" to 2 decimal places.) X Req B2 Req A1 = = Req C1 Allocated Cost $ $ Req A2 0 0 0 Req C2 >
Problem 4-24A (Algo) Allocating joint product cost LO 4-4 Stuart 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 17,000 pounds of raw chicken that costs $9,250, the company produces two parts: 3,400 pounds of drumsticks and 5,700 pounds of breast for a processing cost of $6,502. The chicken breast is further processed into 4,900 pounds of steak for a processing cost of $2,900. The market price of drumsticks per pound is $1.60 and the market price per pound of chicken steak is $4.90. If Stuart decided to sell chicken breast instead of chicken steak, the price per pound would be $2.50. Required a-1. Allocate the joint cost to the joint products, drumsticks and breasts, using weight as the allocation base. a-2. Calculate the gross profit for each product. a-3. If the drumsticks are producing a loss, should that product line be eliminated? b-1. Reallocate the joint cost to the joint products, drumsticks and breasts, using relative market values as the allocation base. b-2. Calculate the gross profit for each product. c-1. Should Martin further process chicken breasts into chicken steak? (Use the assumption made in requirement b-1). c-2. How would the profit be affected by your answer in c-1? Complete this question by entering your answers in the tabs below. Req A1 Req A2 Product Drumsticks Chicken breast Total allocated cost Req A3 Req B1 Allocation Rate x Weight of Base X Allocate the joint cost to the joint products, drumsticks and breasts, using weight as the allocation base. (Round "Allocation rate" to 2 decimal places.) X Req B2 Req A1 = = Req C1 Allocated Cost $ $ Req A2 0 0 0 Req C2 >
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Transcribed Image Text:Problem 4-24A (Algo) Allocating joint product cost LO 4-4
Stuart 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 17,000 pounds of raw chicken
that costs $9,250, the company produces two parts: 3,400 pounds of drumsticks and 5,700 pounds of breast for a processing cost
of $6,502. The chicken breast is further processed into 4,900 pounds of steak for a processing cost of $2,900. The market price
of drumsticks per pound is $1.60 and the market price per pound of chicken steak is $4.90. If Stuart decided to sell chicken breast
instead of chicken steak, the price per pound would be $2.50.
Required
a-1. Allocate the joint cost to the joint products, drumsticks and breasts, using weight as the allocation base.
a-2. Calculate the gross profit for each product.
a-3. If the drumsticks are producing a loss, should that product line be eliminated?
b-1. Reallocate the joint cost to the joint products, drumsticks and breasts, using relative market values as the allocation base.
b-2. Calculate the gross profit for each product.
c-1. Should Martin further process chicken breasts into chicken steak? (Use the assumption made in requirement b-1).
c-2. How would the profit be affected by your answer in c-1?
Complete this question by entering your answers in the tabs below.
Req A1
Req A2
Product
Drumsticks
Chicken breast
Total allocated cost
Req A3
Req B1
Allocation Rate x Weight of Base
X
Allocate the joint cost to the joint products, drumsticks and breasts, using weight as the allocation base. (Round "Allocation
rate" to 2 decimal places.)
X
Req B2
Req A1
=
=
Req C1
Allocated Cost
$
$
Req A2
0
0
0
Req C2
>
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