Benson 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 14,000 pounds of raw chicken that costs $7,450, the company produces two parts: 2,500 pounds of drumsticks and 4,500 pounds of breast for a processing cost of $2,466. The chicken breast is further processed into 3,700 pounds of steak for a processing cost of $1,700. The market price of drumsticks per pound is $1.40 and the market price per pound of chicken steak is $3.70. If Benson 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. 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 Req A3 Total cost of drumsticks Total cost of chicken breasts Req B1 Req B2 Req C1 Req C2 Reallocate the joint cost to the joint products, drumsticks and breasts, using relative market values as the allocation base. (Round intermediate calculations and final answers to 2 decimal places.)

FINANCIAL ACCOUNTING
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ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
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Benson 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 14,000 pounds of raw chicken that
costs $7,450, the company produces two parts: 2,500 pounds of drumsticks and 4,500 pounds of breast for a processing cost of
$2,466. The chicken breast is further processed into 3,700 pounds of steak for a processing cost of $1,700. The market price of
drumsticks per pound is $1.40 and the market price per pound of chicken steak is $3.70. If Benson 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.
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
Req A3
Total cost of drumsticks
Total cost of chicken breasts
Req B1
Req B2
< Req A3
Req C1
Reallocate the joint cost to the joint products, drumsticks and breasts, using relative market values as the allocation base.
(Round intermediate calculations and final answers to 2 decimal places.)
Req C2
Req B2 >
Transcribed Image Text:Benson 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 14,000 pounds of raw chicken that costs $7,450, the company produces two parts: 2,500 pounds of drumsticks and 4,500 pounds of breast for a processing cost of $2,466. The chicken breast is further processed into 3,700 pounds of steak for a processing cost of $1,700. The market price of drumsticks per pound is $1.40 and the market price per pound of chicken steak is $3.70. If Benson 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. 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 Req A3 Total cost of drumsticks Total cost of chicken breasts Req B1 Req B2 < Req A3 Req C1 Reallocate the joint cost to the joint products, drumsticks and breasts, using relative market values as the allocation base. (Round intermediate calculations and final answers to 2 decimal places.) Req C2 Req B2 >
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