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Harper Chicken Corporation processes and packages chicken for grocery stores. It purchases chickens from farmers and processes them into two different products: chicken drumsticks
Harper 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 12,000 pounds of raw chicken that costs $7,000, the company produces two parts: 2,800 pounds of drumsticks and 4,200 pounds of breast for a processing cost of $2,450. The chicken breast is further processed into 3,200 pounds of steak for a processing cost of $2,000. The market price of drumsticks per pound is $1.25 and the market price per pound of chicken steak is $4.20. If Harper decided to sell chicken breast instead of chicken steak, the price per pound would be $2.20. Required a-1. Allocate the joint cost to the joint products, drumsticks and breasts, using weight as the allocation base. a-2. Calculate the gross profit for each product. a-3. If the drumsticks are producing a loss, should that product line be eliminated? b-1. Reallocate the joint cost to the joint products, drumsticks and breasts, using relative market values as the allocation base. b-2. Calculate the gross profit for each product. c-1. Should Harper further process chicken breasts into chicken steak? (Use the assumption made in requirement b-1). c-2. How would the profit be affected by your answer in c-? Complete this question by entering your answers in the tabs below. Req A1 Req A2 Req A3 Req 81 Req 82 Req C1 Req C2 Allocate the joint cost to the joint products, drumsticks and breasts, using weight as the allocation base. (Round "Allocation Rate" to 2 decimal places.) Product Drumsticks Chicken breast Total allocated cost Allocation Rate Weight of Base: Allocated Cost $ 0 0 $ 0
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