Cost Allocation for Jordan Chicken Corporation

What are the two products produced by Jordan Chicken Corporation?

Is there a difference in market prices between chicken drumsticks and chicken steak? What about chicken breast?

Answer:

The two products produced by Jordan Chicken Corporation are chicken drumsticks and chicken steak. The market price of chicken drumsticks is $1.50 per pound, while chicken steak is sold at $4.30 per pound. If the company decides to sell chicken breast instead of chicken steak, the price per pound would be $2.40.

Jordan Chicken Corporation processes and packages chicken for grocery stores. The company purchases raw chickens from farmers and processes them into chicken drumsticks and chicken breast. The market price for chicken drumsticks is $1.50 per pound, while chicken steak is priced at $4.30 per pound. If the company switches to selling chicken breast instead of chicken steak, the price per pound would be $2.40.

To allocate the joint cost to the joint products, we need to determine the total weight of the chicken drumsticks and chicken breast produced. From the data given, the company processes 2,000 pounds of drumsticks and 4,000 pounds of chicken breast from a standard batch of 15,000 pounds of raw chicken, resulting in a total of 6,000 pounds of products. The total cost of raw chicken and processing costs is $8,350 + $1,352 = $9,702. To allocate this cost between drumsticks and breasts, we proportion the total cost by the weight of each product. The cost per pound of product is calculated as $9,702 / 6,000 = $1.617. Therefore, the allocated joint cost for chicken drumsticks is 2,000 pounds * $1.617 = $3,234. The allocated joint cost for chicken breasts is 4,000 pounds * $1.617 = $6,468. Hence, the joint costs of producing chicken drumsticks and chicken breasts are $3,234 and $6,468 respectively.