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by: Moises Lubowitz IV


Moises Lubowitz IV
GPA 3.73


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Class Notes
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This 0 page Class Notes was uploaded by Moises Lubowitz IV on Sunday November 1, 2015. The Class Notes belongs to ACCT 353 at New Mexico State University taught by Staff in Fall. Since its upload, it has received 27 views. For similar materials see /class/233194/acct-353-new-mexico-state-university in Accounting at New Mexico State University.




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Date Created: 11/01/15
ACCT 353 7 Cost Accounting Summer 11 2004 Chapter 7 Case Mayer Meat Company recently began business when the reluctant owner Oscar had to take delivery on a commodities option contract that he failed to cover The contract was for a truckload of port bellies After processing the purchase Oscar ended up with 4000 pounds ofbacon 4000 pounds of sausage and 8000 pounds ofpork chops The truckload cost 23000 and the joint processing costs were an additional 9000 The sausage required extra processing and packaging that cost 2800 The following data pertain to Mayer s activities during the rst week of business Product Produced Sold Pound Sales Oscar prepared the following income statement allocating joint costs by the physical unit method pounds produced but is concerned about the results Bacon Sausage Chops Total Sales 3480 1000 9870 14350 Cost of goods sold 2400 1350 4200 7950 Gross pro t 1080 350 5670 6400 Operating expenses 2200 Operating income 4200 Cost of goods sold was computed as follows Joint costs 32000 Pounds produced 16000 200 per pound plus an extra 070 per pound for the extra processing of the sausage Separable costs 2800 Pounds produced 4000 070 per pound Oscar thinks he should quit selling sausage immediately because he is losing money with every pound sold He brie y thought about raising the price to 270 per pound to cover the costs but quickly decided that no one would buy the product at that price unless he repackaged the sausage and added seven special herbs and spices which would cost an additional 060 per pound Question Using your knowledge of joint cost allocation methods what advice would you give Oscar regarding the sausage Should he keep selling it at 200 per pound add the seven special herbs and spices and sell it at 270 per pound or just throw it away Support your answers with appropriate calculations


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