1. Benson 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 14,000 pounds of raw chicken that costs $7,450, the company produces two parts: 2,500 pounds of drumsticks and 4,500 pounds of breast for a processing cost of $2,466. The chicken breast is further processed into 3,700 pounds of steak for a processing cost of $1,700. The market price of drumsticks per pound is $1.40 and the market price per pound of chicken steak is $3.70. If Benson decided to sell chicken breast instead of chicken steak, the price per pound would be $2.20.

(Please help me answer b1 and b2! I did the first three problems)

a-1. Allocate the joint cost to the joint products, drumsticks and breasts, using weight as the allocation base.

Product	Allocation Rate	x	Weight of Base	=	Allocated Cost
Drumsticks	$1.42	x	2,500	=	$3,550
Chicken breast	1.42	x	4,500	=	6,390
Total allocated cost					$9,940

a-2. Calculate the gross margin for each product.

	Chicken Drumsticks	Chicken Breast
Revenue	$3,500	$9,900
Cost of goods sold	(3,541)	(6,375)
Gross margin	$(41)	$3,525

a-3. If the drumsticks are producing a loss, should that product line be eliminated?

The drumstick product line

should not

be eliminated.

b-1. Reallocate the joint cost to the joint products, drumsticks and breasts, using relative market values as the allocation base.

Total cost of drumsticks	$
Total cost of chicken breasts	$

b-2. Calculate the gross margin for each product.

	Chicken Drumsticks	Chicken Breast
Revenue	$	$
Cost of goods sold
Gross profit