Quality Chicken grows and processes chickens. Each chicken is disassembled into five main parts. Information pertaining to

Question:

Quality Chicken grows and processes chickens. Each chicken is disassembled into five main parts. Information pertaining to production in July 2015 is:

Kilograms ofWholesale Selling Price per Kilogram

Parts Product When Production Is Complete

Breasts ............... 100 .............................................. $0.55

Wings .................. 20 ............................................... 0.20

Thighs .................. 40 .............................................. 0.35

Bones ................... 80 .............................................. 0.10

Feathers ................ 10 ............................................... 0.05

Joint cost of production in July 2015 was $50.

A special shipment of 40 kilograms of breasts and 15 kilograms of wings has been destroyed in a fire. Quality Chicken's insurance policy provides reimbursement for the cost of the items destroyed. The insurance company permits Quality Chicken to use a joint cost allocation method. The splitoff point is assumed to be at the end of the production process.

Required

1. Compute the cost of the special shipment destroyed using:

a. Sales value at splitoff method.

b. Physical measure method (kilograms of finished product).

2. What joint cost allocation method would you recommend Quality Chicken use? Explain.

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Related Book For  book-img-for-question

Cost Accounting A Managerial Emphasis

ISBN: 978-0133138443

7th Canadian Edition

Authors: Srikant M. Datar, Madhav V. Rajan, Charles T. Horngren, Louis Beaubien, Chris Graham

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