Solved: Martin Chicken Corporation processes and

packages chicken for grocery stores

Martin Chicken Corporation processes and packages chicken for grocery stores

Martin 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 Martin decided to sell chicken breast
instead of chicken steak, the price per pound would be $2.20.

Required
a. Allocate the joint cost to the joint products, drumsticks and breasts, using weight as the
allocation base. Calculate the net income for each product. Since the drumsticks are producing
a net loss, should that product line be eliminated?
b. Reallocate the joint cost to the joint products, drumsticks and breasts, using relative market
values as the allocation base. Calculate the net income for each product. Compare the total net
income (drumsticks 1 breasts) computed in Requirement b with that computed in Requirement a
above. Explain why the total amount is the same. Comment on which allocation base (weight or
market value) is more appropriate. Round your figures to 2 decimal points.
c. Should Martin further process chicken breasts into chicken steak?

Martin Chicken Corporation processes and packages chicken for grocery stores

ANSWER
https://solvedquest.com/martin-chicken-corporation-processes-and-packages-chicken-for-
grocery-stores/

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