16-16 Joint-cost allocation, insurance settlement. Quality Chicken grows and processes chickens. Each chicken is disassembled into five main parts. Information pertaining to production in July 2012 is as follows:

Joint cost of production in July 2012 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:

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

Answer rating: 100% (QA)

a Under Sales Value at Splitoff Method Joint cost is allocated to the joint product produced during ... View the full answer