Joint cost allocat ion. Flash Chip Company (FCC) produces memory modules in a two-step process:

chip fabrication and module assembly.

In chip fabrication, each batch of raw silicon wafers yields 500 standard chips and 500 deluxe chips.

Chips are classified as standard or deluxe on the basis of their density (the number of memory bits on each

chip). Standa rd chips have 500 memory bits per chip, and deluxe chips have 1,000 memory bits per chip.

Joint costs to process each batch are $24,000.

In module assembly, each batch of standard chips is converted into standard memory modules at a

separately identified cost of $1,000 and then sold for $8,500. Each batch of deluxe chips is converted into

deluxe memory modules at a separately identified cost of $1,500 and then sold for $25,000.

Required

1. All ocate joint costs of each batch to deluxe modules and sta ndard modules using (a) the NRV method,

(b) the constant gross margin percentage NRV method, and (c) the physical measure method, ba sed on

the number of memory bits. Which method should FCC use?

2. FCC can process each batch of 500 standard memory modules to yield 400 DRAM modules at an additional

cost of $1,600. The selling price per DRAM module would be $26. Assume FCC uses the physical

measure method. Should FCC sell th e standard memory modules or the DRAM modules?