Boston Metals buys raw ore on the open market and processes it into two products, A and B. The ore costs $12 per pound, and the process separating it into A and B has a cost of $6 per pound. During 20X1, Boston plans to produce

186,000 pounds of A and 589,000 pounds of B from 775,000 pounds of ore. A sells for $35 a pound and B for $10 a pound. The company allocated joint costs to the individual products for inventory valuation purposes.

Requirements

1. Allocate all the joint costs to A and B using the physical-units method.

2. Allocate all the joint costs to A and B using the relative-sales-value method.

3. Suppose Boston cannot sell product B in the form in which it emerges from the joint process. Instead, it must be processed further at a fixed cost of $341,000 plus a variable cost of $1 per pound. Then, it can be sold for $20.00 a pound. Allocate all the joint costs to A and B using the relative-sales-value method.