Allocating common costs to joint products by two methods—

relative sales value and adjusted relative sales value. The Wayne Company has a single manufacturing process that results in two products. Salgon, a salt, has a sales price of $18 per kilogram, while Lorex, a liquid, has a sales price of $54 per liter.

During May 19X7, total manufacturing costs in the final department were $708,000.

Production for the month was 20,000 kilograms of Salgon and 15,000 liters of Lorex. Additional costs to process Lorex are estimated to be $5 per liter.

Instructions 1. Compute the cost to be allocated to each unit of each product for May 19X7, under the following assumptions:

a. The relative sales value method is used to allocate costs.
_b. The adjusted relative sales value method is used to allocate costs.
2. Briefly compare the effects of the two methods of allocating costs.