Problem 2- Joint Costing and Byproduct [80 marks] Awesome Cosmetics purchases flowers in bulk and processes them into perfume. From a certain mix of petals, the firm uses Process A to generate Heilala, its high-grade perfume, as well as a certain residue. The residue is then further treated, using Process B, to yield Fafau, a medium-grade perfume. An ounce of residue typically yields an ounce of Fafau. In July, the company used 25,000 pounds of petals. Costs involved in Process A, i.e., reducing the petals to Heilala and the residue, were: Direct materials$440,000; direct labour$220,000; overhead costs $110,000. The additional costs of producing Fafau in Process B were: Direct materials$22,000; direct labour3$50,000; overhead costs $40,000. During July, Process A yielded 7,000 ounces of Heilala and 49,000 ounces of residue. From this, 5,000 ounces of Heilala were packaged and sold for $109.50 an ounce. Also, 28,000 ounces of Fafau were processed in Process B and then packaged and sold for $31.50 an ounce. The other 21,000 ounces remained as residue. Packaging costs incurred were $137,500 for Heilala and $196,000 for Fafau. The firm has no beginning inventory on July 1. If it so desired, the firm could have sold unpackaged Heilala for $56 an ounce and the residue from Process A for $24 an ounce. Required L What is the joint cost of the firm to be allocated to Heilala and Fafau? (4 marks) 2. Under the physical measure method, how would the joint costs be allocated to Heilala and Fafau?(6 marks) 3. Under the sales value at splitoff method, what portion of the joint costs would be allocated to Heilala and Fafau, respectively? (8marks) 4. What is the estimated net realisable value per ounce of Heilala and Fafau? (7marks) 5. Under the net realisable value method, what portion of the joint costs would be allocated to Heilala and Fafau, respectively? (8 marks) 6. What is the gross margin percentage for the firm as a whole? (8marks) 7. Allocate the joint costs to Heilala and Fafau under the constant gross-margin percentage NRV method. (15 marks) If you were the manager of Awesome Cosmetics, would you continue to process the petal residue into Fafau perfume? Explain your answer. (4 marks) Discuss the importance of choosing an appropriate cost allocation method when dealing with joint products and by-products in manufacturing. In your answer, explain how different allocation methods (e.g., Physical Measure Method, Sales Value at Splitoff Method, and Net Realisable Value Method) impact financial reporting, decision- making, and product pricing strategies for a company like Awesome Cosmetics. (10 marks) . Evaluate the decision-making process behind further processing a joint product or by- product beyond the splitoff point. Using the example of Awesome Cosmetics' decision to process the residue into Fafau, discuss the factors a manager should consider when deciding whether to continue further processing. Consider both financial aspects (e.g., net realisable value, additional costs) and non-financial factors (e.g., market demand, strategic positioning). (10marks)