Joint Cost Allocations Otto Inc. specializes in chicken farming. Chickens are ra

Question

Joint Cost Allocations Otto Inc. specializes in chicken farming. Chickens are raised, packaged, and sold mostly to grocery chains. Chickens are accounted for in batches of 50,000. At the end of each growing period, the chickens are separated and sold by grades. Grades AA and A are sold to large grocery chains, and B and C are sold to other buyers. For costing purposes, Otto treats each batch of chicks as a joint product. The cost data for a batch of 50,000 chicks follow: Number of Chickens 25,000 15,000 6,000 4,000 Selling Price per Pound $1.00 0.75 0.50 0.25 Average Pounds per Chicken Grade 4 Total joint costs for the batch were $125,000 Required: Compute the cost allocations for each product, using the sales value at split-off method. Round sales value percentages to five decimal places. Round allocated costs to the nearest dollar. Enter sales value percentage in decimals. Sales Value at Split-off 125000 45000 Sales Value Allocated Product Percentage Joint Cost Cost 125000 6000 1000 $ 125000 177000

Explanation / Answer

Product Sales value at split off point Sales value percentage Joint costs Allocated cost AA 125000 70.62147% 125000 88277 A 45000 25.42373% 125000 31780 B 6000 3.38983% 125000 4237 C 1000 0.56497% 125000 706 177000 100.00000% 125000

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