Answer:
a1)
drumstink 3,780
breast 5,670
a2)
drumstink (280)
breast 3,570
a3) it cannot be eliminated as it is a subproduct of the breast we cannot produce breast without also, produing the drumstink
b) joint-cost and gross margin considering market value as wat to allocate joint-cost
drumstink 2.596,15
breast .853,85
gross margin
drumstink 903.85
breast 2,386.15
<em>Questions:</em>
a-1. Allocate the joint cost to the joint products, drumsticks and breasts, using weight as the allocation base.
a-2. Calculate the gross margin for each product.
a-3. If the drumsticks are producing a loss, should that product line be eliminated?
b-1. Reallocate the joint cost to the joint products, drumsticks and breasts, using relative market values as the allocation base.
b-2. Calculate the gross profit for each product.
Explanation:
cost for the joint process:
7,000 raw materials + 2,450 conversion cost = 9,450
weights: 2,800 drumstiks
<u> 4,200 breast </u>
total 7,000
drumstink 9,450 x 2,800/7,000 = 3780
breast 9,450 x 4,200/7,000 = 5670
gross margin
drumstink 2,800 * 1.25 - 3,780= (280)
breast 4,200 * 2.20 - 5,670 = 3,570
<em>using market value as weight:</em>
drumstink 2,800 * 1.25 = 3,500
breast 4,200 * 2.20 = <u> 9,240 </u>
total sales value 12,740
drumstink 9,450 x 3,500/12,740 = 2.596,15
breast 9,450 x 9,240/12,740 = 6.853,85
gross margin
drumstink 3,500 - 2,596.15 = 903.85
breast 9,240 - 6,853.85 = 2,386.15
