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 Product Drumsticks Chicken breast Total allocated cost Req A3 Req B1 Req B2 Allocate the joint cost to the joint products, drumsticks and breasts, using weight as the allocation base. (Round "Allocation rate" to 2 decimal places.) Allocation Rate x Weight of Base = X Req C1 Allocated Cost $ $ Req C2 0 0 0 Check
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 Product Drumsticks Chicken breast Total allocated cost Req A3 Req B1 Req B2 Allocate the joint cost to the joint products, drumsticks and breasts, using weight as the allocation base. (Round "Allocation rate" to 2 decimal places.) Allocation Rate x Weight of Base = X Req C1 Allocated Cost $ $ Req C2 0 0 0 Check
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
Related questions
Concept explainers
Process Costing
Process costing is a sort of operation costing which is employed to determine the value of a product at each process or stage of producing process, applicable where goods produced from a series of continuous operations or procedure.
Job Costing
Job costing is adhesive costs of each and every job involved in the production processes. It is an accounting measure. It is a method which determines the cost of specific jobs, which are performed according to the consumer’s specifications. Job costing is possible only in businesses where the production is done as per the customer’s requirement. For example, some customers order to manufacture furniture as per their needs.
ABC Costing
Cost Accounting is a form of managerial accounting that helps the company in assessing the total variable cost so as to compute the cost of production. Cost accounting is generally used by the management so as to ensure better decision-making. In comparison to financial accounting, cost accounting has to follow a set standard ad can be used flexibly by the management as per their needs. The types of Cost Accounting include – Lean Accounting, Standard Costing, Marginal Costing and Activity Based Costing.
Topic Video
Question
Transcribed Image Text:**Benson Chicken Corporation Case Study**
**Overview:**
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 costing $7,450, the company produces:
- 2,500 pounds of drumsticks for a processing cost of $2,466.
- 4,500 pounds of breast, further processed into 3,700 pounds of steak for a processing cost of $1,700.
**Market Prices:**
- Drumsticks: $1.40 per pound
- Chicken steak: $3.70 per pound
- Alternative chicken breast price: $2.20 per pound
**Required Tasks:**
**a-1.** Allocate the joint cost to the joint products using weight as the allocation base.
**a-2.** Calculate the gross profit for each product.
**a-3.** Determine if the drumsticks should be eliminated if they are producing a loss.
**b-1.** Reallocate the joint cost using relative market values as the allocation base.
**b-2.** Calculate the gross profit for each product again.
**c-1.** Evaluate if Martin should further process chicken breasts into chicken steak (consider the assumption made in requirement b-1).
**c-2.** Assess how the profit would be affected by the decision in c-1.
**Interactive Table:**
- Use the table to input data and calculate joint costs allocated to drumsticks and chicken breast, based on weight.
- The table prompts you through requirements (a-1, a-2, a-3, b-1, b-2, c-1, c-2) for analysis.
**Instruction:**
Enter the allocation rate and weight, then compute the allocated cost for each product to derive total allocated costs.
Transcribed Image Text:**Benson Chicken Corporation Case Study**
**Scenario:**
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.
**Requirements:**
**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?
**Instructions:**
Complete this question by entering your answers in the tabs below: Req A1, Req A2, Req A3, Req B1, Req B2, Req C1, Req C2.
**Table: Calculate the gross profit for each product.**
| Product | Chicken Drumsticks | Chicken Breast |
|-------------------|--------------------|----------------|
| Revenue | | |
| Cost of goods sold| | |
| Gross margin | $0 | $0 |
This exercise involves understanding joint cost allocation and assessing profitability under different pricing strategies.
Expert Solution
This question has been solved!
Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.
This is a popular solution!
Trending now
This is a popular solution!
Step by step
Solved in 3 steps
Knowledge Booster
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, accounting and related others by exploring similar questions and additional content below.Recommended textbooks for you
Accounting
Accounting
ISBN:
9781337272094
Author:
WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.
Publisher:
Cengage Learning,
Accounting Information Systems
Accounting
ISBN:
9781337619202
Author:
Hall, James A.
Publisher:
Cengage Learning,
Accounting
Accounting
ISBN:
9781337272094
Author:
WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.
Publisher:
Cengage Learning,
Accounting Information Systems
Accounting
ISBN:
9781337619202
Author:
Hall, James A.
Publisher:
Cengage Learning,
Horngren's Cost Accounting: A Managerial Emphasis…
Accounting
ISBN:
9780134475585
Author:
Srikant M. Datar, Madhav V. Rajan
Publisher:
PEARSON
Intermediate Accounting
Accounting
ISBN:
9781259722660
Author:
J. David Spiceland, Mark W. Nelson, Wayne M Thomas
Publisher:
McGraw-Hill Education
Financial and Managerial Accounting
Accounting
ISBN:
9781259726705
Author:
John J Wild, Ken W. Shaw, Barbara Chiappetta Fundamental Accounting Principles
Publisher:
McGraw-Hill Education