Hi. Provide long complete explanation and solution in good form.

I. Palen Chemical Company manufactures X-111, X-112, and X-113 from a joint process. The following information is available for the period just ended:

X-111

X-112

X-113

Total

Units produced

6,000

14,000

30,000

50,000

Joint cost allocation

?

$18,400

?

$80,000

Sales value at split-off

$104,000

?

?

$260,000

Required:

A. Does Palen allocate joint costs by using the physical-units method? Explain.

B. Assume that Palen does not use the physical-units method but instead allocates joint costs by using the relative-sales-value method. Find the four unknowns in the preceding table.

II. Companies are free to use the direct, step-down, and reciprocal allocation methods when dealing with service-department costs.

Required:

A. How does the direct method work? What is its chief limitation?

B. Is the step-down method an improvement over the direct method? Explain.

C. Which of the three methods is the most correct from a conceptual viewpoint? Why?

III. Clandestine Corporation allocates joint costs by using the net-realizable-value method. In the company's Texas plant, products D and E emerge from a joint process that costs $250,000. E is then processed at a cost of $220,000 into products F and G. Data pertaining to D, F, and G follow.

D

F

G

Costs beyond split-off

$50,000

$27,000

$25,000

Selling price

40

38

50

Pounds produced

10,000

4,000

2,000

Required:

A. Allocate the $220,000 processing cost between products F and G.

B. From a profitability perspective, should product E be processed into products F and G? Show your calculations.

C. Assume that the net realizable value associated with E is zero. How would you allocate the joint cost of $250,000?