Comparison of alternative joint cost allocation methods, further-processing decision, chocolate products. The Chocolate Factory manufactures and distributes chocolate products. It purchases cocoa beans and processes them into two intermediate products: chocolate-powder liquor base and milk chocolate liquor base. These two intermediate products become separately identifiable at a single split off point. Every 1,500 pounds of cocoa beans yields 60 gallons of chocolate-powder liquor base and 90 gallons of milk-chocolate liquor base. The chocolate-powder liquor base is further processed into chocolate powder. Every 60 gallons of chocolate powder liquor base yield 600 pounds of chocolate powder. The milk-chocolate liquor base is further processed into milk chocolate. Every 90 gallons of milk-chocolate liquor base yield 1,020 pounds of milk chocolate. Production and sales data for August 2012 are as follows (assume no beginning inventory):Cocoa beans processed, 15,000 pounds Costs of processing cocoa beans to split off point (including purchase of beans), $30,000

Production	Sales	Selling Price	Separable Processing Costs
Chocolate powder	6,000 pounds	6,000 pounds	$4 per pound	$12,750
Milk chocolate	10,200 pounds	10,200 pounds	$5 per pound	$26,250

Chocolate Factory fully processes both of its intermediate products into chocolate powder or milk chocolate. There is an active market for these intermediate products. In August 2012, Chocolate Factory could have sold the chocolate-powder liquor base for $21 a gallon and the milk-chocolate liquor base for $26 a gallon. Product yields and average sales values on a per-unit basis from the joint process are as follows: Production and sales data for August 2012 are as follows (assume no beginning inventory): Cocoa beans processed, 15,000 pounds Costs of processing cocoa beans to split off point (including purchase of beans), $30,000

Production Sales Selling Price Separable Processing Costs Chocolate powder 6,000 pounds 6,000 pounds $4 per pound $12,750 Milk chocolate 10,200 pounds 10,200 pounds $5 per pound $26,250

1. Calculate how the joint costs of $30,000 would be allocated between chocolate powder and milk chocolate under the following methods:

a. Sales value at split off

b. Physical-measure (gallons)

c. NRV

d. Constant gross-margin percentage NRV

2. What are the gross-margin percentages of chocolate powder and milk chocolate under each of the methods in requirement 1?

3. Could Chocolate Factory have increased its operating income by a change in its decision to fully process both of its intermediate products? Show your computations.