Joint Cost Allocation and Product Profitability: Prednose Refining Company receives silicon crystals which it processes into purified wafers and chips. Silicon crystals cost $30,000 per tank-car load. The process is such that the crystals are heated for 12 hours, at the end of which time there are 40,000 purified wafers, with a market value of $10,000, and 20,000 chips, with a market value of $65,000. The cost of the heat process is $7,200.

Required:

a. If the crystal costs and the heat process costs are to be allocated on the basis of units of output, what cost would be assigned to each product?

b. If the crystal costs and the heat process costs are allocated on the basis of the net realizable value, what cost would be assigned to each product?

c. Can you determine which product is more profitable? Explain why or why not.