Question

VUILLAU Processing cost 9707 It Jadan chicken purchases chickens from tamos and processes them into two different caducts: chicken drumsticks and chicken sterk from a standard batch of 15,000 pounds of raw chicken that costs $8,350, the I company produces the parts: 2.000 bands of drumsticks and 4.000 pounds of breast for a processing cost of 1,352 The chicken breast is further processed into 3,200 pounds of steak for a processing cost of $2,300. The market price of drumsticks per paund is $150 and the market price per paund of chicken steak is $4.30. It Jardan decided To Sell chicken breast instead of chicken steak, the price per pound would be $2.40. If Martin processes the chicken breasts into Chicken steak, how will the protit be affected?

Answer 1

Undertanding the question :- Jordan Chicken is a corporation that purchases chickens from farmers and then processes the chicken to get the end products -A) Chicken drumsticks and B) Chicken Streak, which is again derived from processed chicken breast. Below is the calculation for total cost per pound for chicken drumstick and chicken stick. Description Weights in pound Amount (USD) A) Total price of raw chicken 8,350.00 B) Processing cost of chicken breast 1,352.00 C) Total Cost (A+B) 9,702.00 D) Total pounds of drumstick produced E) Total pounds of chicken breast produced F) Total weight (E+F) 2,000 4,000 6,000 E) Cost per pound (Total cost/Total Weight) or C/F 1.62 USD

Note: Now some part of chicken breast is further processed to chicken streak the cost per unit for which is 3,200 pounds / 2,300 USD = USD 1.39. Hence, in order to make chicken streak Jordan corporation need to spend addional 1.39 USD per pound on an abouve 1.62 USD/pound. Therefore cost per unit for chicken streak is 1.62 USD+1.39 USD = 3.09 USD Products Drumstick Chicken breast Chicken streak Below is the calculation of total cost Weights in pounds Cost per pound in Total Cost in USD (H) USD (1) (HX) Workings 2,000 1.62 3,234.00 =2000*1.62 4,000 1.62 6,468.00 -4000*1.62 3,200 3.01 9,632.00 =3200*3.01 Below is the calculation of final selling price Total Selling Weights in pounds Selling price per price in USD pound in USD (K) (J*K) Workings 2,000 3000 =2000*1.5 4,000 9600 =4000*2.4 3,200 4.3 13760 =3200*4.3 Products Drumstick Chicken breast Chicken streak 1.5 2.4

Products Drumstick Chicken breast Chicken streak Below is the calculation of final selling price Total Selling Weights in pounds Selling price per price in USD pound in USD (K) (J*K) Workings 2,000 1.5 3000 =2000*1.5 4,000 2.4 9600 -4000*2.4 3,200 4.3 13760 =3200*4.3 Products Drumstick Chicken breast Chicken streak Below is the Profit/Loss calculation product wise Total Selling Price Total Cost in USD in USD (M) (N) 3,000.00 3,234.00 9,600.00 6,468.00 13,760.00 9,632.00 Profit/Loss in USD (M-N) Workings (234.00) =3000-3234 3,132.00 =9600-6468 4,128.00 =13760-9632 Answer:- As per the above calculation, if Martin processes the chicken breats into chicken streak, his profit will be more by 996 USD (4,128 USD - 3,132 USD)