John is the management accountant of Mix and Match company. Recently John and Gregory, the production manager were engaged in a discussion about joint costs and related issues.

The company produces various types of paints. Gregory commented "John, I really do not see the need for cost allocation. Also , the fact that there are various methods would seem to imply that any allocation would be arbitrary".

You are required to explain the following to Gregory in order to help clarify his concerns:

1) The reasons for Joint cost allocation

2) The Sales value at split-off and Physical value methods.

In your discussion, you should relate to the nature of the business of Mix and Match company using appropriate examples.