1. Clarion Company, a new firm, manufactures two products, J and K, in a common process. The joint costs amount to $80,000 per batch of finished goods. Each batch results in 20,000 liters of output, of which 80% are J and 20% are K.

The two products are processed beyond the split-off point, with Clarion incurring the following separable costs: J, $2 per liter; K, $5 per liter. After the additional processing, the selling price of J is $12 per liter, and the selling price of K is $15 per liter.

Required:

A. Determine the proper allocation of joint costs if the company uses the net-realizable value method.

B. Assume that Clarion sold all of its production of K during the current accounting period. Compute Ks sales revenue, cost of goods sold, and gross margin.

C. Repeat the analysis in A and B assuming that Clarion uses the physical units method to allocate joint costs.

D. Repeat the analysis in A and B assuming that Clarion uses the relative sales value method to allocate joint costs.

E. Is the firms cost of goods sold influenced by the choice of a joint-cost allocation method? Use your responses to B through D to support your answer.

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thanks!