Joint cost allocation, insurance settlement. Quality Chicken grows and processes chickens. @

Each chicken is disassembled into five main parts. Information pertaining to production in 1a aint casts ailucaiedta July 2009 is:

Joint cost of production in July 2009 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.LO1

Transcribed Image Text:

Kilograms of Product Wholesale Selling Price per Kilogram When Production Is Complete Parts Breasts 100 $0.55 Wings 20 0.20 Thighs 40 0.35 Bones 80 0.10 Feathers 10 0.05