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Martin Chicken Corporation processes and packages chicken for grocery stores. It purchases chickens from farmers and processes them into two different products: chicken drumsticks and
Martin 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 Martin 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. (Round "Allocation Rate" to 2 decimal places and other answers to the nearest dollar amount.) Product Allocation Rate x Weight of Base =Allocated Cost 1.35 x 2,800 $ $ Drumsticks 3,780 1.35 x 4,200 Chicken breast 5,670 Total allocated $ 9,450 cost a-2. Calculate the gross margin for each product. Chicken Chicken Drumsticks Breast $ $ 9,240 Revenue 3,500 5,670 Cost of goods sold 3,780 $ $ Gross margin (280) 3,570 If the drumsticks are producing a loss, should that product line be -3. 'eliminated? Yes ONo b-1. Reallocate the joint cost to the joint products, drumsticks and breasts, using relative market values as the allocation base. (Round your intermediate calculations and final answers to 2 decimal places.) Total cost of drumsticks Total cost of chicken breasts b- Calculate the gross margin for each product. (Round your intermediate 2. calculations and final answers to 2 decimal places.) Chicken Breast Chicken Drumsticks Revenue Cost of goods sold Gross margin c-1. Should Martin further process chicken breasts into chicken steak? (Use the assumption made in requirement b-1) OYes ONo c-2.How would the profit be affected by your answer c-1 Effect on profit
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