Question

Pirate Seafood Company purchases lobsters and processes them into tails and flakes. It sells the lobster tails for $21 per pound and the flakes for $14 per pound. On average, 100 pounds of lobster are processed into 52 pounds of tails and 22 pounds of flakes, with 26 pounds of waste. Assume that the company purchased 2,400 pounds of lobster for $4.50 per pound and processed the lobsters with an additional labor cost of $1,800. No materials or labor costs are assigned to the waste. If 1,096 pounds of tails and 324 pounds of flakes are sold calculate the allocated cost of the sold items and the allocated cost of the ending inventory. The company allocates joint costs on a value basis.(Round cost per pound answers to 2! decimal places.)

Answer 1

Hint:

% of market Value = Numerator / Denominator

Allocated Cost of 2400 pounds purchases = % of market Value * Cost to be allocated

Cost per pounds = Allocated Cost of 2400 pounds purchases / Yield per 2400 lb. Purchase

Answer:

	Yield per 2400 lb. Purchase	Market Value per 2400 LB Purchase	Percentage of Market Value			Cost to be allocated	Allocated Cost 2400 pounds purchases	Cost per pounds
			Numerator	Denominator	% of market Value
Lobster Tails	1,248	$ 26,208	$     26,208	$ 33,600	78%	$ 12,600	$        9,828	$       7.88
Lobster Flakes	528	$    7,392	$        7,392	$ 33,600	22%	$ 12,600	$        2,772	$       5.25
Totals	1,776	$ 33,600			100%		$     12,600
Allocated cost to items sold
	Cost per pound	Multiply: Pounds Sold	Cost of Goods sold
Lobster Tails	$        7.88	1,096	$        8,636
Lobster Flakes	$        5.25	324	$        1,701
Totals			$     10,337
Allocated cost to ending inventory
	Cost per pound	Multiply: Pounds Sold	Cost of Goods sold
Lobster Tails	$        7.88	152	$        1,198
Lobster Flakes	$        5.25	204	$        1,071
Totals			$        2,269

Calculation:

Yield per 2400 lb. Purchase
Lobster Tails (2400*52/100)	1,248
Lobster Flakes (2400*22/100)	528
Market Value per 2400 LB Purchase
Lobster Tails (1248*21)	$        26,208
Lobster Flakes (528*14)	$          7,392
Total cost of material and labor
Lobster cost (2400*4.5)	$        10,800
Labor cost	$          1,800
Cost to be allocated	$        12,600
Allocated Cost 2400 pounds purchases
Lobster Tails (12600*78%)	$          9,828
Lobster Flakes (12600*22%)	$          2,772
Cost per pounds
Lobster Tails (9828/1248)	$            7.88
Lobster Flakes (2772/528)	$            5.25