For 15 years, the United States and South Africa were embroiled in a trade dispute over chicken. South African authorities, in response to claims that American poultry farmers were "dumping" chicken meat in South Africa by selling it at unfairly low prices, imposed tariffs on chicken from the United States. The duties were so high that American producers were locked out of the market entirely. The dispute focused on differing consumer preferences and joint-cost allocation. In South Africa, consumers prefer dark meat chicken (thighs and legs), while Americans have a strong preference for white meat (breasts and wings). As a result, American producers were able to sell certain dark meat chicken products for a higher price in South Africa than they could in America. With large amounts of U.S. dark meat chicken in the South African market, officials believed that American producers were selling the meat at a price below the cost of production, a violation of trade rules, and imposed 209 to 375 percent antidumping duties on U.S. chicken. The United States rejected those claims, arguing that South African officials were ignoring the joint-cost allocation methods of American producers. Until chicken parts are separated from each other, those parts incur joint costs of production. To determine the costs associated with certain chicken parts, such as thighs and legs, you have to allocate those joint costs between all the parts of a chicken. American producers allocate joint costs based on the relative value of the different end products. The products that command a higher price are assigned a larger share of the joint costs. With dark meat chicken products selling for less in America than white meat, those parts were assigned a smaller share of the joint coststhe opposite of what would occur in South Africa! In 2015, the United States and South Africa resolved the long-running trade war over chicken. Under the terms of the settlement, South Africa agreed to establish a large quota for imports of U.S. chicken that are exempt from the antidumping duties. American producers were pleased, but they missed out on a 70% increase in South African chicken consumption between 2000 and 2015. Today, the United States only supplies 3% of the country's $340 million in annual chicken imports.

Regarding joint cost allocation, discuss the following:

• Identify the two primary methods used to allocate joint costs.
• Compare the advantages and disadvantages of the two primary methods used to allocate joint costs to joint products.
• Explain how the choice of allocation method may affect the financial statements.
• Understand how U.S. chicken producers used the method of allocating joint costs for chicken processing.