The Parvis Paramount Pigsty (PPP) raises pigs, from which a variety of pork products are processed. The herd features the Danish Yorkshire, which typically reaches 105 kgs at maturity. The following table summarizes the production process of producing Porktry, Porfekt, and Porkatoo from one pig. $$\begin{array} { | l | r | r | r | }
\hline & \text { Porktry } & \text { Porfekt } & \text { Porkatoo } \
\hline \text { Weight, in kgs } & 45 & 20 & 35 \
\hline \text { Sale price, kg } & € 22.50 & € 84.00 & € 28.00 \
\hline \text { Processing costs per kg } & 60.30 & € 2.52 & € 0.40 \
\hline
\end{array}$$ Previous research has indicated that raising a Danish Yorkshire from breeding to disposition costs an average of €3 per kg. The ratio of pig parts to products is relatively inflexible; as yet, bio-engineering has failed to produce pigs with other than four legs. Of the statements below, which is true of the allocation of the joint costs?
A)By weight, Porktry is allocated € 81.41
B)By relative sales value, Porkatoo is allocated € 80.05
C)Since Porktry is the least profitable product, it should be discontinued and resources devoted to Porfekt
D)By relative net realizable values, Porfekt is allocated € 135.09
E)None of the above

Question

The Parvis Paramount Pigsty (PPP) raises pigs, from which a variety of pork products are processed. The herd features the Danish Yorkshire, which typically reaches 105 kgs at maturity. The following table summarizes the production process of producing Porktry, Porfekt, and Porkatoo from one pig. $$\begin{array} { | l | r | r | r | } 
\hline & \text { Porktry } & \text { Porfekt } & \text { Porkatoo } \
\hline \text { Weight, in kgs } & 45 & 20 & 35 \
\hline \text { Sale price, kg } & € 22.50 & € 84.00 & € 28.00 \
\hline \text { Processing costs per kg } & 60.30 & € 2.52 & € 0.40 \
\hline
\end{array}$$ Previous research has indicated that raising a Danish Yorkshire from breeding to disposition costs an average of €3 per kg. The ratio of pig parts to products is relatively inflexible; as yet, bio-engineering has failed to produce pigs with other than four legs. Of the statements below, which is true of the allocation of the joint costs?
A)By weight, Porktry is allocated € 81.41
B)By relative sales value, Porkatoo is allocated € 80.05
C)Since Porktry is the least profitable product, it should be discontinued and resources devoted to Porfekt
D)By relative net realizable values, Porfekt is allocated € 135.09
E)None of the above

Quizplus · Accepted Answer

The joint costs should be allocated based on the relative net realizable values of the products. From the table, we can calculate the net realizable value of each product by subtracting the additional processing costs from the selling price. The net realizable values are: Porktry - € 20.59, Porfekt - € 135.09, Porkatoo - € 47.05. Therefore, by relative net realizable values, Porfekt is allocated € 135.09. None of the other options are true based on the information provided in the question.

The Parvis Paramount Pigsty (PPP) Raises Pigs, from Which a Variety