MediaForum has three operating groups: Games, News, and Documentaries. In May, the company incurred $24,000,000 of joint cost for facilities and administration. May revenues and separate production costs of each group are as follows:

a. What amount of joint cost is allocated to each operating group using the net realizable value approach? Compute the profit for each operating area after the allocation.
b. What amount of joint cost is allocated to each operating group if the allocation is based on revenues? Compute the profit for each operating group after the allocation.
c. Assume you are head of the Games Group. Would the difference in allocation bases create significant problems for you when you report to the top management of the company? Develop a short presentation for top management if the allocation base in (b) is used to determine each operating group's relative profitability. Be certain to discuss important differences in revenues and cost figures for the Games and Documentariesgroups.

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Games News Documentaries $189,440,000 110,720,000 Revenue 35,840,000 30,720,000 16,320,000 Separate costs 32,960,000