The Rainbow Oil Company buys crude vegetable oil. Refining this oil results in four products at the splitoff point. A, B, C, and D. Product C is fully processed by the splitoff point. Products A, B, and D can individually be further refined into Super A, Super B, and Super D. In the most recent month (December), the output at the splitoff point was as follows:

times	Product A, 275,000 gallons
times	Product B, 100,000 gallons
times	Product C, 75,000 gallons
times	Product D, 50,000 gallons

The joint costs of purchasing and processing the crude vegetable oil were

$105,000. Rainbow had no beginning or ending inventories. Sales of product C in December were $45,000. Products A, B, and D were further refined and then sold. Data related to December are as follows:

	Separable Processing Costs
	to Make Super Products	Revenues
Super A	$240,000	$375,000
Super B	60,000	150,000
Super D	45,000	75,000

Rainbow had the option of selling products A, B, and D at the splitoff point. This alternative would have yielded the following revenues for the December production:

times	Product A, $ 75 comma 000$75,000
times	Product B, $ 62 comma 500$62,500
times	Product D, $ 67 comma 500$67,500

1.

Compute the gross-margin percentage for each product sold in December, using the following methods for allocating the $105,000 joint costs:

a.	Sales value at splitoff
b.	Physical-measure
c.	NRV

2.

Could Rainbow have increased its December operating income by making different decisions about the further processing of products A, B, or D? Show the effect on operating income of any changes you recommend.