The We Care Pharmaceutical Company produces two pain relievers, premium and regular, through a joint process. Joint costs amount to $2,000 per batch of output. Each batch totals 5,000 grams: 75% premium and 25% regular. Both products are processed further.

Separable processing costs:

Premium.............................$0.025 per gram

Regular...............................$0.010 per gram

Selling price:

Premium.............................$10.00/10g

Regular.................................$6.00/10g

REQUIRED:

A. Allocate the joint costs according to the physical output method.

B. Allocate the joint costs according to the net realizable value method.

C. Allocate the joint costs according to the constant gross margin NRV method.

D. Explain the advantages and disadvantages of each method, including the reactions of the product line managers.