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.) Product Allocation Rate x Weight of Base Allocated Cost Drumsticks х Chicken breast х Total allocated cost a-2. Calculate the gross margin for each product. Chicken Chicken Drumsticks Breast Revenue Cost of goods sold Gross margin a-3. If the drumsticks are producing a loss, should that product line be eliminated? Yes 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
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.) Product Allocation Rate x Weight of Base Allocated Cost Drumsticks х Chicken breast х Total allocated cost a-2. Calculate the gross margin for each product. Chicken Chicken Drumsticks Breast Revenue Cost of goods sold Gross margin a-3. If the drumsticks are producing a loss, should that product line be eliminated? Yes 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
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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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.)
Product
Allocation Rate x Weight of Base Allocated Cost
Drumsticks
х
Chicken breast
х
Total allocated
cost
a-2. Calculate the gross margin for each product.
Chicken
Chicken
Drumsticks
Breast
Revenue
Cost of goods sold
Gross margin
a-3. If the drumsticks are producing a loss, should that product line be eliminated?
Yes
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
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