You have recently been appointed as the financial manager at Chickens Ltd, a company which specialises in the processing of frozen chickens through a joint process. The major products processed by the company are whole chickens as well as various chicken pieces (i.e. legs, thighs, etc). The process also results in other insignificant products such as bones and skin. The CEO has been extremely concerned about the costing of products. He has noted that before your appointment, there was a lack of qualified financial personal who were able to accurately cost the products. He believes that too few costs are allocated to high value products (such as the whole chickens) while too many costs are assigned to the lower value products such as the chicken pieces and insignificant products. In fact, he has noted that some of the costs allocated to the products exceed the selling prices resulting in significant write downs of inventory for accounting purposes. Required Draft a memorandum to the CEO in which you discuss any problems identified from the above and potential solutions to these problems.
You have recently been appointed as the
The CEO has been extremely concerned about the costing of products. He has noted that before your appointment, there was a lack of qualified financial personal who were able to accurately cost the products. He believes that too few costs are allocated to high value products (such as the whole chickens) while too many costs are assigned to the lower value products such as the chicken pieces and insignificant products. In fact, he has noted that some of the costs allocated to the products exceed the selling prices resulting in significant write downs of inventory for accounting purposes.
Required
Draft a memorandum to the CEO in which you discuss any problems identified from the above and potential solutions to these problems.
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