* More Info Cocoa beans processed, 28,000 pounds Costs of processing cocoa beans to splitoff point (including purchase of beans), 562,000 Separable Production Sales Selling Price Processing Costs Chocolate powder 9,100 pounds 6,500 pounds 59 per pound $ 50,100 Milk chocolate 14,980 pounds 13,500 pounds $10 per pound $ 60,115 Hot Chocolate 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, Hot Chocolate Edibles Factory could have sold the chocolate-powder liquor base for $20 a gallon and the milk-chocolate liquor base for $60 a gallon. The Hot Chocolate Edibles Factory manufactures and distributes chocolate products. P in More Info 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 2,000 pounds of cocoa beans yields 50 gallons of chocolate powder liquor base and 50 gallons of milk-chocolate liquor base. The chocolate powder liquor base is further processed into chocolate powder. Every 50 gallons of chocolate powder liquor base yield 650 pounds of chocolate powder. The milk-chocolate liquor base is further processed into milk chocolate. Every 50 gallons of milk-chocolate liquor base yield 1,070 pounds of milk chocolate. A Requirements 1. Calculate how the joint costs of $62,000 would be allocated between chocolate powder and milk chocolate under the following methods: a. Sales value at splitoff b. Physical measure (gallons) c. NRV (Net Realizable Value) 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 Hot Chocolate Edibles Factory have increased its operating income by a change in its decision to fully process both of its intermediate products? Show your computations