(continuation of Exercise 15-16). Quality Chicken is computing the ending inventory values for its July 31, 2015, statement of financial position. Ending inventory amounts on July 31 are 15 kilograms of breasts, 4 kilograms of wings, 6 kilograms of thighs, 5 kilograms of bones, and 2 kilograms of feathers.
Quality Chicken’s management wants to use the sales value at splitoff method. However, they want you to explore the effect on ending inventory values of classifying one or more products as a byproduct rather than a joint product.
1. Assume Quality Chicken classifies all five products as joint products. What are the ending inventory values of each product on July 31, 2015?
2. Assume Quality Chicken uses the production method of accounting for byproducts. What are the ending inventory values for each joint product on July 31, 2015, assuming breasts and thighs are the joint products and wings, bones, and feathers are byproducts?
3. Comment on differences in the results in requirements 1 and 2.
Quality Chicken grows and processes chickens. Each chicken is disassembled into five main parts. Information pertaining to production in July 2015 is:
Joint cost of production in July 2015 was $50.
A special shipment of 40 kilograms of breasts and 15 kilograms of wings has been destroyed in a fire. Quality Chicken’s insurance policy provides reimbursement for the cost of the items destroyed. The insurance company permits Quality Chicken to use a joint cost allocation method. The splitoff point is assumed to be at the end of the production process.
1. Compute the cost of the special shipment destroyed using:
a. Sales value at splitoff method.
b. Physical measure method (kilograms of finished product).
2. What joint cost allocation method would you recommend Quality Chicken use? Explain.
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