Reference no: EM132572065

Will Tree Beef Ltd. (WTB) processes cow beef into three main products: steak, hamburger and hides. The average cost per cow is $1,400. The three main products emerge from a process that costs $200 per cow to run, and output from each cow can be sold for the following net amounts:

Steak               120 kilograms                $2,400

Hamburger          80 kilograms                 1,000

Hides               25 kilograms                 120

Total                                                $3,520

The steak can be processed further into frozen steak dinners at WTB's packaging plant. Each of the 360 dinners produced from the 120 kilograms of steak include vegetables that cost an average of $1 per dinner. Production, selling and other costs for the 360 dinners cost $230 in total. Each dinner can be sold for $16. The hamburger could be made into frozen hamburger patties. The only additional cost would be $2 per kilogram of hamburger processed to shape the patties. Frozen hamburger patties sell for $14 per kilogram. Required:

Question a) Using the relative sales value at split-off point method for joint cost allocation, calculate the joint costs allocated to each of WTB's three products: steak, hamburger and hides.

Question b) Assume that the net revenue of hides is NOT significant, and that WTB processes the steak and hamburger further into frozen dinners and frozen hamburger patties. Using the estimated net realizable value method for joint cost allocation, calculate the total cost of goods sold for one cow.

Question c) WTB is considering an option to process the original hamburger into fresh steak patties (instead of frozen) at a different plant. The additional processing cost would be $3 per kilogram of hamburger processed plus an additional $40 for total setup costs. The fresh hamburger patties could be sold for $18 per kilogram. Determine and explain whether the hamburger should be processed into fresh hamburger patties or frozen hamburger patties. Show all calculations.