Carleigh, Inc., is a pork processor. Its plants, located in the Midwest, produce several products from a common process: sirloin roasts, chops, spare ribs, and the residual. The roasts, chops, and spare ribs are packaged, branded, and sold to supermarkets. The residual consists of organ meats and leftover pieces that are sold to sausage and hot dog processors. The joint costs for a typical week are as follows: Direct materials $93,500 Direct labor 28,200 Overhead 18,500 The revenues from each product are as follows: sirloin roasts, $78,000; chops, $73,500; spare ribs, $33,000; and residual, $8,800. Carleigh’s management has learned that certain organ meats are a prized delicacy in Asia. They are considering separating those from the residual and selling them abroad for $53,800. This would bring the value of the residual down to $3,050. In addition, the organ meats would need to be packaged and then air freighted to Asia. Further processing cost per week is estimated to be $29,200 (the cost of renting additional packaging equipment, purchasing materials, and hiring additional direct labor). Transportation cost would be $10,900 per week. Finally, resource spending would need to be expanded for other activities as well (purchasing, receiving, and internal shipping). The increase in resource spending for these activities is estimated to be $2,950 per week. Required: 1. What is the gross profit earned by the original mix of products for one week? $fill in the blank 1 2. Should the company separate the organ meats for shipment overseas or continue to sell them at split-off? Separate the organ meats for shipment overseas What is the effect of the decision on weekly gross profit? Increase by $fill in the blank 4
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.
Sell or Process Further, Basic Analysis
Carleigh, Inc., is a pork processor. Its plants, located in the Midwest, produce several products from a common process: sirloin roasts, chops, spare ribs, and the residual. The roasts, chops, and spare ribs are packaged, branded, and sold to supermarkets. The residual consists of organ meats and leftover pieces that are sold to sausage and hot dog processors. The joint costs for a typical week are as follows:
| Direct materials | $93,500 |
| Direct labor | 28,200 |
| 18,500 |
The revenues from each product are as follows: sirloin roasts, $78,000; chops, $73,500; spare ribs, $33,000; and residual, $8,800.
Carleigh’s management has learned that certain organ meats are a prized delicacy in Asia. They are considering separating those from the residual and selling them abroad for $53,800. This would bring the value of the residual down to $3,050. In addition, the organ meats would need to be packaged and then air freighted to Asia. Further
Required:
1. What is the gross profit earned by the original mix of products for one week?
$fill in the blank 1
2. Should the company separate the organ meats for shipment overseas or continue to sell them at split-off?
Separate the organ meats for shipment overseas
What is the effect of the decision on weekly gross profit?
Increase by $fill in the blank 4
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