Quality Chicken grows and processes chickens. Each chicken is disassembled into five main parts. Information pertaining to production in July
Joint cost of production in July 2012 was $50.
A special shipment of 40 kilograms of breasts and 15 kilograms of wings has been destroyed in a fire. Quality Chickens insurance policy provides reimbursement for the cost of the items destroyed. The insurance company permits Quality Chicken to use a joint cost allocation method. The splitoff point is assumed to be at the end of the production process.
1. Compute the cost of the special shipment destroyed using:
a. Sales value at splitoff method.
b. Physical measure method (kilograms of finished product).
2. What joint cost allocation method would you recommend Quality Chicken use? Explain.
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