Buck Lake Company pays a flat fee of $500 for the right to retrieve stray golf balls from lakes and ponds at golf and country clubs. The recovered balls are sorted by quality; a, b, c, then sold to sporting goods stores at the following prices per dozen: A classification is $5; B classification is $4; and C classification is $3. Last month $10,000 of cost (including the fee) was incurred retrieving the following: a classification, 3,000 dozen; b classification, 4,000 dozen; and c classification 5,000 dozen.

1. Determine the cost, gross profit and gross profit percent for each type of golf ball using the physical units method of joint cost allocation.
2. Buck Lake has an opportunity to sell the 3,000 dozen A category balls to a private investor for $18,500; however, the balls will need to be cleaned. The company estimates that the cost of cleaning will be 25 cents per dozen. Assuming the physical unit method is used to allocate joint costs, should the offer be accepted? Why or why not?

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