Inorganic Chemicals purchases salt and processes it into products such as caustic soda, chlorine, and PVC (polyvinyl chloride). In July, Inorganic Chemicals pur- chased salt for $40,000. Conversion costs of $60,000 were incurred up to the splitoff point, at which time two salable products were produced: caustic soda and chlorine. Chlorine can be further processed into PVC. The July production and sales information are as follows:

All 800 tons of chlorine were further processed, at incremental costs of $20,000, to yield 500 tons of PVC. There were no byproducts from this further process- ing of chlorine. There were no beginning or ending inventories of caustic soda, chlorine, or PVC in July. There is an active market for chlorine. Inorganic Chemicals could have sold all its July production of chlorine at $75 a ton. Required 1. Calculate how the joint costs of $100,000 would be allocated between caustic soda and chlorine under the following methods:

(a) sales value at splitoff,

(b) physical measure (tons), and

(e) estimated net realizable value. 2. What is the gross-margin percentage of

(a) caustic soda, and

(b) PVC under the three methods in requirement 1? 3. Lifetime Swimming Pool Products offers to purchase 800 tons of chlorine in August at $75 a ton. This sale of chlorine would mean that no PVC would be produced in August. How would accepting this offer affect Inorganic's August operating income?

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Production Sales Selling Price Per Ton $ 50 Caustic soda Chlorine 1,200 tons 1,200 tons 800 tons PVC 500 tons 500 tons 200