Collaborative Learning Problem

16-37 Joint Cost Allocation, processing further and ethics. Unified Chemical Company has a joint pro- duction process that converts Zeta into two chemicals: Alpha and Beta. The company purchases Zeta for $12 per pound and incurs a cost of $30 per pound to process it into Alpha and Beta. For every 10 pounds of Zeta, the company can produce 8 pounds of Alpha and 2 pounds of Beta. The selling price for Alpha and Beta are $76.50 and $144.00, respectively.

Unified Chemical generally processes Alpha and Beta further in separable processes to produce more refined products. Alpha is processed separately into Alphalite at a cost of $25.05 per pound. Beta is processed separately into Betalite at a cost of $112.80 per pound. Alphalite and Betalite sell for $105 and $285 per pound, respectively. In the most recent month, Unified Chemical purchased 15,000 pounds of Zeta. The company had no beginning or ending inventory of Zeta.

1. Allocate the joint costs to Alphalite and Betalite under the following methods:

a. Sales value at splitoff b. Physical measure (pounds) c. Net realizable value

d. Constant gross margin percentage NRV