Question

Pirate seafood company purchases lobsters and processes them into tails and flakes. it sells the lobster tails for $21 per pound and the flakes for $14 per pound. on average, 100 pounds of lobster are processed into 52 pounds of tails and 22 pounds of flakes, with 26 pounds of waste. assume that the company purchased 2,400 pounds of lobster for $4.50 per pound and processed the lobsters with an additional labor cost of $1,800. no materials or labor costs are assigned to the waste. of 1,096 pounds of tails and 324 pounds of flakes are sold,calculate the allocated cost of the sold items and the allocated cost of the ending inventory. the company allocates joint costs on a value basis.(round cost per pound answers to 2 decimal places.)

Answer 1

Allocated costs of items sold = $10337.48
Allocated costs of remaining inventory = $2268.76

First, calculate how much inventory is actually produced from 2400 lbs of lobsters.
Tails = 2400/100*52 = 1248
Flakes = 2400/100*22 = 528

The value of that inventory is:
Tails = 1248 * $21 = $26208
Flakes = 528 * $14 = $7392
Total = $26208 + $7392 = $33600
Now the percentage of value to distribute costs among.
Tails = 26208 / 33600 = 0.78
Flakes = 1 - 0.78 = 0.22

Cost of inventory
Materials: 2400 * $4.50 = $10800
Labor: $1,800
Total: $10800 + $1800 =  $12600

Now let's distribute the cost between the tails and flakes:
Tails: 0.78 * $12600 = $9828
Flakes: 0.22 * $12600 = $2772

Now let's calculate the cost per pound of the inventory
Tails: $9828 / 1248 = $7.88/lb
Flakes: $2772 / 528 = $5.25/lb

Of the 1096 lbs of tails sold, that leaves 1248-1096 = 152 lbs in inventory.
Cost of tails sold = 1096 * $7.88 = $8636.48
Cost of remaining tail inventory = 152 * 7.88 = $1197.76

Of the 324 lbs of flakes sold, that leaves 528-324 = 204 lbs in inventory.
Cost of flakes sold = 324 * $5.25 = $1701
Cost of remaining flake inventory = 204 * 5.25 = $1071

Allocated costs of items sold = $8636.48+$1701 = $10337.48
Allocated costs of remaining inventory = $1197.76+$1071=$2268.76