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Problem 4-24A Allocating joint product cost LO 4-4 Gibson Chicken Corporation processes and packages chicken for grocery stores. It purchases chickens from farmers and processes
Problem 4-24A Allocating joint product cost LO 4-4 Gibson 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 15,000 pounds of raw chicken that costs $8,200, the company produces two parts: 2,000 pounds of drumsticks and 5,000 pounds of breast for a processing cost of $3,887. The chicken breast is further processed into 4,200 pounds of steak for a processing cost of $2.200. The market price of drumsticks per pound is $1.65 a instead of chicken steak, the price per pound would be $2.40. nd the market price per pound of chicken steak is $4.20. If Gibson decided to sell chicken breast 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 margin 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 margin for each product c-1. Should Martin further process chicken breasts into chicken steak? (Use the assumption made in c-2. How would the profit be affected by your answer incr requirement b
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