Galinha-Esquina SA grows and processes chickens. Each chicken is disassembled into five main parts. Information pertaining to production in July 2018 is as follows:

Joint costs of production in July 2018 were €100.

A special shipment of 20 kg of breasts and 10 kg of wings has been destroyed in a fire. GalinhaEsquina’s insurance policy provides for reimbursement for the cost of the items destroyed. The insurance company permits Galinha-Esquina to use a joint-cost allocation method. The split-off point is assumed to be at the end of the production line. 

Required 

1. Calculate the cost of the special shipment destroyed using (a) the sales value at split-off point method, and (b) the physical measure method using kilograms of finished product. 

2. Which joint-cost-allocation method would you recommend that Galinha-Esquina use?

Transcribed Image Text:

Wholesale selling price per kilogram at end of production line Parts Kilograms of product Breast 100 €1.10 Wings Thighs 20 0.40 40 0.70 Bones 80 0.20 Feathers 10 0.10