Quality Chicken is computing the ending inventory values for its July 31, 2012, balance sheet. ending inventory amounts on July 31 are 15 kilograms of breasts, 4 kilograms of wings, 6 kilograms of thighs, 5 kilograms of bones, and 2 kilograms of feathers. Quality Chicken’s management wants to use the sales value at split off method.
However, they want you to explore the effect on ending inventory values of classifying one or more products as a byproduct rather than a joint product.
REQUIRED
1. Assume Quality Chicken classifies all five products as joint products. What are the ending inventory values of each product on July 31, 2012?
2. Assume Quality Chicken uses the production method of accounting for byproducts. What are the ending inventory values for each joint product on July 31, 2012, assuming breasts and thighs are the joint products and wings, bones, and feathers are byproducts?
3. Comment on differences in the results in requirements 1 and 2.