Reference no: EM132656234

Harper Chicken Corporation processes and packages chicken for grocery stores. It purchases chickens from farmers and processes them into two different products: chicken drumsticks and chicken steak. From a standard batch of 12.000 pounds of raw chicken that costs $7.000. the company produces two parts: 2,800 pounds of drumsticks and 4,200 pounds of breast for a processing cost of $2.450. The chicken breast is further processed into 3,200 pounds of steak for a processing cost of $2.000. The market price of drumsticks per pound is $1.25 and the market price per pound of chicken steak is $4.20. If Harper decided to sell chicken breast instead of chicken steak, the price per pound would be $2.20.

Required

Question 1: Allocate the joint cost to the joint products. drumsticks and breasts, using weight as the allocation base.

Question 2: Calculate the gross profit for each product.

Question 3: If the drumsticks are producing a loss. should that product line be eliminated?

Question 4: Reallocate the joint cost to the joint products, drumsticks and breasts, using relative market values as the allocation base.

Question 5: Calculate the gross profit for each product.

Question 6: Should Harper further process chicken breasts into chicken steak? (Use the assumption made in requirement

Question 7: How would the profit be affected