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