Question

Jackson Flocks Inc. processes Turkeys into three products for sale on the wholesale market: Breasts Smoked legs and thighs Whole Turkeys Necks and wings for soup The costs to get the products to the point where they can be separately identified total $10,000,000. Additional Information follows: Product Lbs. Produced Cost after split-off Selling price per pound Breasts 1,000,000 $200,000 $2 Smoked legs and thighs 2,500,000 500,000 4 Whole Turkeys 2,000,000 425,000 3 Necks and wings 500,000 350,000 5 Feathers are sold at the split-off point as a by-product for $1,000,000 which lower the joint costs allocated. Based on the information given for Jackson Flocks: allocate the joint processing costs to the three products using: Sales value at split-off method Physical-measure method (volume in units) NRV method Prepare an analysis for Jackson Flocks that compares processing the smoked legs and thighs further, as it currently does, with selling them as a product immediately at split-off. Assume Jackson flocks announced that in six months it will sell the legs and thighs at split-off due to increasing competitive pressure. Identify at least three types of likely behavior that will be demonstrated by the skilled labor in the brining and smoking process as a result of this announcement. Include in your discussion how this behavior could be influenced by management.

Answer 1

There are 4 products here and 3 methods are there to split the common cost of $ 1000000
Products:	Breasts, Smoked legs and thighs, whole turkey, neck and wings
Methods for split off:	1) sales value
	2) Physical measure method ( volume)
	3) NRV method
Computation of profit by using different split off methods
	On the basis of sales value
	Particulars	Breasts	Smoked legd and thighs	whole turkey	neck and wings	total
	Units	1000000	2500000	2000000	500000	6000000
	Selling price per unit	2	4	3	5
	Sales	2000000	10000000	6000000	2500000	20500000
	Split off cost on the basis of sales	97560	487800	292680	121960	1000000
	Cost after split off	200000	500000	425000	350000	1475000
	Profit	1702440	9012200	5282320	2028040	18025000
	On the basis of Volume
	Particulars	Breasts	Smoked legd and thighs	whole turkey	neck and wings	total
	Units	1000000	2500000	2000000	500000	6000000
	Selling price per unit	2	4	3	5
	Sales	2000000	10000000	6000000	2500000	20500000
	Split off cost on the basis of sales	166650	416675	333340	83335	1000000
	Cost after split off	200000	500000	425000	350000	1475000
	Profit	1633350	9083325	5241660	2066665	18025000
	On the basis of NRV
	Particulars	Breasts	Smoked legd and thighs	whole turkey	neck and wings	total
	Units	1000000	2500000	2000000	500000	6000000
	Selling price per unit	2	4	3	5
	Sales	2000000	10000000	6000000	2500000	20500000
	Cost after split off	200000	500000	425000	350000	1475000
	Profit before split off	1800000	9500000	5575000	2150000	19025000
	split off cost	94612	499347	293033	113008	1000000
	Profit after split off	1705388	9000653	5281967	2036992	18025000