Joint-cost allocation, insurance settlement. (20-30 minutes) GalinhaEsquina, SA, grows and processes chickens. Each chicken is disassembled into five main parts. Information pertaining to production in July 2000 is as follows: kio4

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 kg of finished product.

2. Which joint-cost-allocation method would you recommend that GalinhaEsquina use?

Transcribed Image Text:

PARTS Breasts KILOGRAMS OF PRODUCT 100 WHOLESALE SELLING PRICE PER KG AT END OF PRODUCTION LINE EUR 1.10 Wings Thighs Bones Feathers 20 40 80 10 Joint costs of production in July 2000 were EUR 100. 0.40 0.70 0.20 0.10 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 reim- bursement 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.