How much do you think it costs Wendy’s to make a bowl of chili? In particular, compute the cost of a bowl of chili if a) all joint costs are allocated to hamburgers; b) 10% of joint costs are allocated to chili; c) joint costs are allocated to hamburgers and chili using relative sales (Hint: The section Chili Sales provides information on relative sales)

  

Chili Sales The selling prices for all Wendy's' products sold by company restaurants were set at corporate headquarters. Although some price differences existed among restaurants in different locations, representative prices for 2001 were $0.99 for an 8-ounce serving of chili, $1.59 for a 12-ounce serving of chili, and $1.89 for a "single" hamburger. Chili sales were seasonal, and comprised about 5% of total Wendy's store sales compared with about 55% for hamburgers. As shown in Exhibit 1, Wendy's consolidated cost of sales, as a percentage of retail revenues, increased to 63.8% in 2001 from 63.1% in 2000. Food costs in 2001 reflected a 13.4% increase in beef costs, which was partially offset by a 1.6% selling price increase. Retail sales increased by 6.5%, and net income increased by about 14% during 2001.