Quality Chicken grows and processes chickens. Each chicken is disassembled into five main parts. Information pertaining to production in July 2020 follows:

Joint cost of production in July 2020 was $50.
A special shipment of 40 pounds of breasts and 15 pounds of wings has been destroyed in a fire. Quality Chicken’s 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.

Required

1. Compute the cost of the special shipment destroyed using the following:
a. Sales value at splitoff method
b. Physical-measure method (pounds of finished product)
2. What joint-cost-allocation method would you recommend Quality Chicken use? Explain.

Transcribed Image Text:

Parts Breasts Wings Thighs Bones Feathers Pounds of Product 100 20 40 80 10 Wholesale Selling Price per Pound When Production Is Complete $0.55 0.20 0.35 0.10 0.05