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Business Finance

Question Description

Problem 1:

Bubble Corporation manufactures two products, I and II, from a joint process. A single production costs $4,000 and results in 100 units of I and 400 units of II. To be ready for sale, both products must be processed further, incurring separable costs of $1 per unit for I and $2 per unit for II. The market price for Product I is $20 and for Product II is $15.


  1. Allocate joint production costs to each product using the physical units method.
  2. Allocate joint production costs to each product using the net realizable value method.
  3. Allocate joint production costs to each product using the constant gross margin percentage method.

Problem 2:

Mike's Meats incurs costs of $4,000 while processing raw chicken meat into three products: breasts, wings, and thighs. The meat is then sold to local grocery stores based on the following.

Sales Price per lb Quantity produced (lbs)
Breast $2.00 3,000
Wings $0.50 1,000
Thighs $1.00 2,000

Required: (Calculate relative quantity to three decimal points.)

  1. Determine the cost and gross profit percentage for each type of chicken using the physical units method of joint cost allocation.
  2. Repeat part (a) using the sales-value-at-split-off method of joint cost allocation.
  3. The company has an opportunity to sell wings to local restaurants for $1.00 per pound but additional packaging is required, which will cost $300 per 1,000 lb. Assuming the physical unit method is used to allocate joint costs, should the offer be accepted?

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Final Answer

fvzon (378)
Duke University

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