Kumar Milling buys oats at $0.60 per kilogram and produces Oat Flour, Oat Flakes, and Oat Bran. The process of separating the oats into oat flour and oat bran costs $0.30 per kilogram. The oat flour can be sold for $1.50 per kilogram, the oat bran for $2.00 per kilogram. Each kilogram of oats has 0.2 kilograms of oat bran and 0.8 kilograms of oat flour. A kilogram of oat flour can be made into oat flakes for a fixed cost of $240,000 plus a variable cost of $0.60 per kilogram.

Kumar Milling plans to process 1 million kilograms of oats in 2006, at a purchase price of $600,000.

1. Allocate all the joint costs to oat flour and oat bran using the physicalunits method.

2. Allocate all the joint costs to oat flour and oat bran using the relativesales-

value method.

3. Suppose there was no market for oat flour. Instead, it must be made into oat flakes to be sold. Oat flakes sell for $2.90 per kilogram. Allocate the joint cost to oat bran and oat flakes using the relative-sales-value method.