Phillips Paints manufactures three types of paint in a joint process: rubberized paint, rustproofing paint, and aluminum paint. In a standard batch of 500,000 gallons of raw material, the outputs are 240,000 gallons of rubberized paint, 80,000 gallons of rust-proofing paint, and 180,000 gallons of aluminum paint. The production cost of a batch is $2,700,000. The sales prices per gallon are $15, $18, and $20 for rubberized, rust-proofing, and aluminum paint, respectively.

Required

a. Construct a spreadsheet to allocate joint costs to the three products using the number of gallons as the allocation base.

b. Include formulas in your spreadsheet to calculate the gross margin for each paint.