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 splitoff point. Every 900 pounds of cocoa beans yields 30 gallons of chocolate-powder liquor base and 120 gallons of milk-chocolate liquor base. The chocolate-powder liquor base is further processed into chocolate powder. Every 30 gallons of chocolate-powder liquor base yield 670 pounds of chocolate powder. The milk-chocolate liquor base is further processed into milk chocolate. Every 120 gallons of milk-chocolate liquor base yield 1,090 pounds of milk chocolate.

Cocoa beans processed, 19,800 pounds times

Costs of processing cocoa beans to splitoff point (including purchase of beans), $ 68,000

	Production		Sales		Selling Price		Separable Processing Costs
Chocolate powder	14,740	pounds	6,700	pounds	$12	per pound	$8,975
Milk chocolate	23,980	pounds	14,500	pounds	$10	per pound	$91,095

Creme de Cacao Edibles 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 2017, Creme de Cacao Edibles Factory could have sold the chocolate-powder liquor base for $ 24 a gallon and the milk-chocolate liquor base for $ 9 a gallon.

Requirement 1. Calculate how the joint costs of

$ 68000 would be allocated between chocolate powder and milk chocolate under the different methods.

a. Sales value at splitoff method. Begin by entering the appropriate amounts to allocate the joint costs. (Round the weighting amounts to four decimal places.)

	Sales value of total		Joint costs
	production at splitoff	Weighting	allocated
Chocolate powder
Milk chocolate
Total

b. Allocate the joint costs using the physical measure method. Begin by entering the appropriate amounts to allocate the joint costs. (Round the weighting amounts to four decimal places.)

	Physical measure of		Joint costs
	total production	Weighting	allocated
Chocolate powder
Milk chocolate
Total

c. Allocate the joint costs using the net realizable value method. Begin by entering the appropriate amounts to allocate the joint costs. (Round the weighting amounts to four decimal places. Round the joint costs allocated to the nearest whole dollar.)

	Net realizable		Joint costs
	value	Weighting	allocated
Chocolate powder
Milk chocolate
Total

d. Constant gross-margin percentage NRV method. Begin by entering the appropriate amounts to allocate the joint costs. (Round the percentage to four decimal places, X.XXXX%.)

The overall gross-margin percentage for all joint products together is

%.

Now determine the formula to compute the joint costs allocated, then enter the appropriate amounts. (Round your answers to the nearest whole dollar.)

Total production costs

-

Separable processing costs

=

Joint costs allocated

Chocolate powder

-

=

Milk chocolate

-

=

Requirement 2. What are the gross-margin percentages of chocolate powder and milk chocolate under each of the methods in requirement 1? (Use parentheses or a minus sign when entering negative amounts. Round the percentages to the nearest hundredth percent, X.XX%.)

	Chocolate powder		Milk chocolate
a. Sales value at splitoff		%		%

b. Physical-measure

%

%

c. NRV

%

%

d. Constant gross-margin percentage NRV

%

%

Requirement 3. Could

Cocoa Nibs

Edibles Factory have increased its operating income by a change in its decision to fully process both of its intermediate products? Show your computations. (Use parentheses or a minus sign when entering decreasing amounts.)

Begin by determining the formula to compute the increase/(decrease) in operating income, then enter the appropriate amounts.

					Increase/(decrease)
	Incremental revenue	-	Separable processing costs	=	in operating income

Chocolate powder

-

=

Milk chocolate

-

=

Cocoa Nibs

Edibles Factory could increase operating income if chocolate-powder liquor base is

further processed into chocolate powder

and if milk-chocolate liquor base is

further processed into milk chocolate.