Mike's Meats acquires costs of $4,000 while processing raw chicken meat into the three products: breasts, wings and thighs. The meat is then sold to the local grocery stores based on the given:
Sales Price per lb Quantity produced (lbs)
Breast $2.00 3,000
Wings $0.50 1,000
Thighs $1.00 2,000
Required: Compute the relative quantity to three decimal points.
a) Find out the cost and gross profit percentage for each kind of chicken by using the physical units method of joint cost allocation.
b) Repeat part (a) by using the sales-value-at-split-off method of joint cost allocation.
c) The company consists of an opportunity to sell wings to local restaurants for $1.00 per pound however additional packaging is required, which will cost $300 per 1,000 lb. Supposing the physical unit method is employed to allocate joint costs, should the offer be accepted?