Mike's Meats incurs costs of $4,000 while processing raw chicken meat into three products: breasts, wings, and thighs. The meat is then sold to local grocery stores based on the following.
Sales Price per lb. Quantity produced (lbs)
Breast $2.00 3,000
Wings $0.50 1,000
Thighs $1.00 2,000
Required: (Calculate relative quantity to three decimal points.)
1. Determine the cost and gross profit percentage for each type of chicken using the physical units method of joint cost allocation.
2. Repeat part (a) using the sales-value-at-split-off method of joint cost allocation.
3. The company has an opportunity to sell wings to local restaurants for $1.00 per pound but additional packaging is required, which will cost $300 per 1,000 lb. Assuming the physical unit method is used to allocate joint costs, should the offer be accepted?
Your analysis and instructional notes are attached in Excel. Please click in the cells to see computations.