Bubble Corporation manufactures two products, I and II, from a joint process. A single production costs $4,000 and results in 100 units of I and 400 units of II. To be ready for sale, both products must be processed further, incurring separable costs of $1 per unit for I and $2 per unit for II. The market price for Product I is $20 and for Product II is $15.
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- Allocate joint production costs to each product using the physical units method.
- Allocate joint production costs to each product using the net realizable value method.
- Allocate joint production costs to each product using the constant gross margin percentage method.
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)|
Required: (Calculate relative quantity to three decimal points.)
- Determine the cost and gross profit percentage for each type of chicken using the physical units method of joint cost allocation.
- Repeat part (a) using the sales-value-at-split-off method of joint cost allocation.
- 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?