Atlantic Sand and Gravel Corp. produces two grades of sand: coarse and fine. Both grades are used to manufacture industrial abrasives. The results of operations for the last year were as follows:

	Coarse	Fine	Total
Production	4,000 tonne	6,000 tonne	10,000 tonne
Sales value at split-off point	$40,000	$ 50,000	$ 90,000
Revenue	$90,000	$150,000	$240,000
Separable costs	$20,000	$ 15,000	$ 35,000

Joint product costs were $100,000. There were no beginning inventories.

Required:

a) Allocate the joint costs, using the constant gross margin NRV method.

b) Suppose fine sand can be processed further by mixing in color. The cost of adding color is $15 per tonne, and the sand can then be sold for $35 per tonne. Should fine sand be processed further?

c) What uncertainties do managers face in making the decision in Part b ?