Wafers, Inc., processes silicon crystals into purified wafers and chips. Silicon crystals cost $60,000 per tank-car load. The process involves heating the crystals for 12 hours, producing 45,000 purified wafers with a market value of $20,000, and 15,000 chips with a market value of $140,000. The joint cost of the heat process is $25,600.
a. If the crystal costs and the heat process costs are to be allocated on the basis of units of output what cost is assigned to each product?
b. If the crystal costs and the heat process costs are allocated on the basis of the net realizable value, what cost is assigned to each product?
c. How much profit or loss does the purified wafers product provide using the data in this problem and your analysis in requirement a.? Is it really possible to determine which product is more profitable? Explain why or why not.