lOMoARcPSD|25973474
Ch16 SM - no - Financial Accounting: Building
Accounting Knowledge
Financial Accounting I (Chung Yuan Christian University)
, lOMoARcPSD|25973474
16-21 Joint-cost allocation, insurance settlement. Quality Chicken grows and processes
chickens. Each chicken is disassembled into five mainparts. Information pertaining to production
in July 2017 is as follows:
Wholesale Selling Price per
Pound When
Parts Pounds of Product Production Is Complete
Breasts 100 $0.55
Wings 20 0.20
Thighs 40 0.35
Bones 80 0.10
Feathers 10 0.05
Joint cost of production in July 2017 was $50.
A special shipment of 40 pounds of breasts and 15 pounds of wings has been destroyed in a
fire. Quality Chicken’s insurance policy provides reimbursement for the cost of the items
destroyed. The insurance company permits Quality Chicken to use a joint-cost-allocation method.
The splitoff point is assumed to be at the end of the production process.
1. Compute the cost of the special shipment destroyed using the following:
a.Sales value at splitoff method b.Physical-measure method (pounds of finished product)
2. What joint-cost-allocation method would you recommend Quality Chicken use? Explain.
SOLUTIONJoint-cost allocation, insurance settlement.
16-1
,Downloaded by kevin wacira ()
, lOMoARcPSD|25973474
1. (a) Sales value at splitoff method:
Pounds Wholesale Sales Weighting: Joint Allocated
of Selling Price Value Sales Value Costs Costs per
Product per Pound at Splitoff at Splitoff Allocated Pound
Breasts 100 $0.55 $55.00 0.675 $33.75 0.3375
Wings 20 0.20 4.00 0.049 2.45 0.1225
Thighs 40 0.35 14.00 0.172 8.60 0.2150
Bones 80 0.10 8.00 0.098 4.90 0.0613
Feathers 10 0.05 0.50 0.006 0.30 0.0300
250 $81.50 1.000 $50.00
Costs of Destroyed Product Breasts: $0.3375 per pound 40 pounds = $13.50
Wings: $0.1225 per pound 15 pounds = 1.84
$15.34
b. Physical measure method:
Pounds Weighting: Joint Allocated
of Physical Costs Costs per
Product Measures Allocated Pound
Breasts 100 0.400 $20.00 $0.200
Wings 20 0.080 4.00 0.200
Thighs 40 0.160 8.00 0.200
Bones 80 0.320 16.00 0.200
Feathers 10 0.040 2.00 0.200
250 1.000 $50.00
Costs of Destroyed Product Breast: $0.20 per pound 40 pounds = $8
Wings: $0.20 per pound 15 pounds = 3
$11
Note: Although not required, it is useful to highlight the individual product profitability figures:
Sales Value at Physical
Splitoff Method Measures Method
Sales Joint Costs Gross Joint Costs Gross
Product Value Allocated Income Allocated Income
Breasts $55.00 $33.75 $21.25 $20.00 $35.00
Wings 4.00 2.45 1.55 4.00 0.00
Thighs 14.00 8.60 5.40 8.00 6.00
Bones 8.00 4.90 3.10 16.00 (8.00)
Feathers 0.50 0.30 0.20 2.00 (1.50)
16-2
Ch16 SM - no - Financial Accounting: Building
Accounting Knowledge
Financial Accounting I (Chung Yuan Christian University)
, lOMoARcPSD|25973474
16-21 Joint-cost allocation, insurance settlement. Quality Chicken grows and processes
chickens. Each chicken is disassembled into five mainparts. Information pertaining to production
in July 2017 is as follows:
Wholesale Selling Price per
Pound When
Parts Pounds of Product Production Is Complete
Breasts 100 $0.55
Wings 20 0.20
Thighs 40 0.35
Bones 80 0.10
Feathers 10 0.05
Joint cost of production in July 2017 was $50.
A special shipment of 40 pounds of breasts and 15 pounds of wings has been destroyed in a
fire. Quality Chicken’s insurance policy provides reimbursement for the cost of the items
destroyed. The insurance company permits Quality Chicken to use a joint-cost-allocation method.
The splitoff point is assumed to be at the end of the production process.
1. Compute the cost of the special shipment destroyed using the following:
a.Sales value at splitoff method b.Physical-measure method (pounds of finished product)
2. What joint-cost-allocation method would you recommend Quality Chicken use? Explain.
SOLUTIONJoint-cost allocation, insurance settlement.
16-1
,Downloaded by kevin wacira ()
, lOMoARcPSD|25973474
1. (a) Sales value at splitoff method:
Pounds Wholesale Sales Weighting: Joint Allocated
of Selling Price Value Sales Value Costs Costs per
Product per Pound at Splitoff at Splitoff Allocated Pound
Breasts 100 $0.55 $55.00 0.675 $33.75 0.3375
Wings 20 0.20 4.00 0.049 2.45 0.1225
Thighs 40 0.35 14.00 0.172 8.60 0.2150
Bones 80 0.10 8.00 0.098 4.90 0.0613
Feathers 10 0.05 0.50 0.006 0.30 0.0300
250 $81.50 1.000 $50.00
Costs of Destroyed Product Breasts: $0.3375 per pound 40 pounds = $13.50
Wings: $0.1225 per pound 15 pounds = 1.84
$15.34
b. Physical measure method:
Pounds Weighting: Joint Allocated
of Physical Costs Costs per
Product Measures Allocated Pound
Breasts 100 0.400 $20.00 $0.200
Wings 20 0.080 4.00 0.200
Thighs 40 0.160 8.00 0.200
Bones 80 0.320 16.00 0.200
Feathers 10 0.040 2.00 0.200
250 1.000 $50.00
Costs of Destroyed Product Breast: $0.20 per pound 40 pounds = $8
Wings: $0.20 per pound 15 pounds = 3
$11
Note: Although not required, it is useful to highlight the individual product profitability figures:
Sales Value at Physical
Splitoff Method Measures Method
Sales Joint Costs Gross Joint Costs Gross
Product Value Allocated Income Allocated Income
Breasts $55.00 $33.75 $21.25 $20.00 $35.00
Wings 4.00 2.45 1.55 4.00 0.00
Thighs 14.00 8.60 5.40 8.00 6.00
Bones 8.00 4.90 3.10 16.00 (8.00)
Feathers 0.50 0.30 0.20 2.00 (1.50)
16-2
