Allocating Joint Costs in Benson Chicken Corporation

How does Benson Chicken Corporation allocate joint costs to its products?

What are the weight ratios for the chicken drumsticks and chicken breast?

What is the allocated cost for each product?

Allocation of Joint Costs in Benson Chicken Corporation

To allocate the joint cost to the joint products, the weight of the products is used as the allocation base.

Benson Chicken Corporation follows a method of allocating joint costs to its products based on the weight of the products. This ensures a fair distribution of costs among the different products resulting from processing.

The weight ratio for each product is calculated by dividing the weight of the product by the total weight of the original batch. In this case, for chicken drumsticks, the weight ratio would be 2,500 pounds / 14,000 pounds = 0.1786. For chicken breast, the weight ratio would be 4,500 pounds / 14,000 pounds = 0.3214.

Next, the joint cost is allocated to each product by multiplying the weight ratio by the total joint cost. For chicken drumsticks, the allocated cost would be 0.1786 * $2,466 = $440.22. For chicken breast, the allocated cost would be 0.3214 * $2,466 = $792.78.

This allocation method ensures that each product bears its fair share of the total joint cost incurred during processing. By using weight as the allocation base, Benson Chicken Corporation can accurately distribute costs and make informed pricing decisions for its products.