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    1. Galinha-Esquina SA processes chickens into parts that are then sold. A special shipment of breasts and wings was destroyed in a fire. The insurance company will reimburse using a joint cost allocation method. 2. Calculating the costs using the sales value at split-off point method results in a reimbursement of €15.9, while the physical measure method results in €12. 3. Some parts can be further processed into barbecue meat, increasing their value. Calculating using the estimated NRV method for the barbecue meat shipment results in a reimbursement of €18.6.

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    1. Galinha-Esquina SA processes chickens into parts that are then sold. A special shipment of breasts and wings was destroyed in a fire. The insurance company will reimburse using a joint cost allocation method. 2. Calculating the costs using the sales value at split-off point method results in a reimbursement of €15.9, while the physical measure method results in €12. 3. Some parts can be further processed into barbecue meat, increasing their value. Calculating using the estimated NRV method for the barbecue meat shipment results in a reimbursement of €18.6.

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    © All Rights Reserved
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    3 views3 pages

    CostAcc CaseCh06 A

    Uploaded by

    Như Trần
    1. Galinha-Esquina SA processes chickens into parts that are then sold. A special shipment of breasts and wings was destroyed in a fire. The insurance company will reimburse using a joint cost allocation method. 2. Calculating the costs using the sales value at split-off point method results in a reimbursement of €15.9, while the physical measure method results in €12. 3. Some parts can be further processed into barbecue meat, increasing their value. Calculating using the estimated NRV method for the barbecue meat shipment results in a reimbursement of €18.6.

    Copyright:

    © All Rights Reserved
    Download as PDF, TXT or read online from Scribd
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    of 3

    Chapter 6: Cost Allocation: Joint Cost Situations

    Case Study/Exercise: Galinha-Esquina SA


    Galinha-Esquina SA grows and processes chickens. Each chicken is disas-
    sembled into five main parts. Information pertaining to production in July
    2019 is as follows:

    Parts Kilograms of product Wholesale selling price per kg at


    the end of production line
    Breast 100 €1.10
    Wings 20 0.40
    Thighs 40 0.70
    Bones 80 0.20 Fachbereich Elektrische
    Feathers 10 0.10 Energietechnik

    Dipl.-Kffr.
    Joint costs of production in July 2019 were €100.
    Sabine Katterbach

    A special shipment of 20 kg of breasts and 10 kg of wings has been de- Center for Business Education
    stroyed in a fire. Galinha-Esquina’s insurance policy provides for reimburse-
    ment for the cost of the items destroyed. The insurance company permits
    Galinha-Esquina to use a join-cost-allocation method. The split-off point is Telefon
    assumed to be at the end of the production line. 02921 378-3368
    E-Mail
    katterbach.sabine@fh-swf.de
    Tasks:
    1. Calculate the cost of the special shipment destroyed using Standort Soest
    a) the sales value at split-off point method, and Lübecker Ring 2
    b) the physical measure method using kilograms of finished product. 59494 Soest

    2. Which joint-cost-allocation method would you recommend that Galinha-


    Esquina use?

    3. Assume that Galinha-Esquina can further process the breasts, wings and
    thighs beyond the split-off point into “ready for barbecue meat” by adding
    spices and a marinade. Thus, they can increase the wholesale selling
    price per kg for these products but also incur additional (separable) pro- Fachhochschule
    cessing costs: Südwestfalen
    Sitz: Iserlohn
    Parts Separable processing Wholesale selling price per kg
    costs BBQ-meat for BBQ-meat Hagen
    BBQ-Breast €10 €1.25 Iserlohn
    BBQ-Wings 1 0.45 Meschede
    BBQ-Thighs 2 0.80 Soest

    Calculate the cost of the special shipment destroyed assuming it con- www.fh-swf.de
    tained barbecue meat using the estimated NRV method.

    Hint: Use the provided tables.

    Page 1
    1a) Sales value at split-off point method:
    Product Kg of Wholesale Sales Allocation rate Joint costs Allocation
    product price/kg value at allocated costs per kg
    Q P split-off
    =Q*P
    Breasts 100 110/163= 0,67*100 67/100=
    1.1 110
    0,67 =67 0,67
    Wings 20 0.4 8 0,05 5 0,25

    Thighs 40 0,7 28 0,17 17 0,425

    Bones 80 0,2 16 0,1 10 0,125

    Feathers 10 0,1 1 0,01 1 0,1

    Total 250 2,5 163 1 100 1,57


    Reimbursement by insurance: 15,9

    1b) Physical measures method:


    Product Kg of Allocation rate Joint costs Allocation costs
    product allocated per kg
    Breasts
    100 100:250=0,4 40 0,4

    Wings 20 0,08 8 0,4

    Thighs 40 0,16 16 0,4

    Bones 80 0,32 32 0,4

    Feathers 10 0,04 4 0,4

    Total 250 1 100 2


    Reimbursement by insurance: 12

    Page 2
    3. Estimated NRV method:
    Product Kg of Wholesale Final Separable Esti- Allocation Joint costs
    prod- price/kg sales processing mated rate allocated
    uct P value costs NRV
    Q =Q*P
    BBQ- 100 1,25 125 10 115 0,68 68
    Breasts

    BBQ-
    Wings 20 0,45 9 1 8 0,05 5
    BBQ-
    Thighs 40 0,80 32 2 30 0,18 18
    Bones 80 0,20 16 0 16 0,09 10

    Feathers 10 0,10 1 0 1 0,01 1

    Total 250 2,8 183 13 170 1 102


    Reimbursement by insurance: (68+10)*20/100+ (5+1)*10/20=
    18,6

    Page 2

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