Galinha-Esquina SA grows and processes chickens. Each chicken is disassembled into five main parts. Information pertaining to production in July 2022 is as follows:

Joint costs of production in July 2022 were €100.
A special shipment of 20 kg of breasts and 10 kg of wings has been destroyed in a fire. Galinha-
Esquina’s insurance policy provides for reimbursement for the cost of the items destroyed. The insurance company permits Galinha-Esquina to use a joint-cost-allocation method. The split-off point is assumed to be at the end of the production line.
Required 1 Calculate the cost of the special shipment destroyed using

(a) the sales value at split-off point method, and

(b) the physical measure method using kilograms of finished product.
2 Which joint-cost-allocation method would you recommend that Galinha-Esquina use?

Transcribed Image Text:

Parts Kilograms of product Breast Wings 100 Wholesale selling price per kilogram at end of production line 1.10 20 0.40 Thighs 40 0.70 Bones 80 0.20 Feathers 10 0.10