Problem 1 Oxnard Corporation processes two products from a joint process. Each product may be sold at the splitoff point or procesessed further. Additional processing requires no special facilities, and production costs of further processing are entirely variable and traceable to the products involved. The following information was available for the month of September: Direct materials processed: 85,500 gallons (80,000 gallons of good product) Production: Product A 31,000 gallons Product B 49,000 gallons

Sales: Product A 31,000 gallons at $5.25 per gallon Product B 49,000 gallons at $5.00 per gallon

The cost of purchasing 85,500 gallons of direct materials and processing it up to the splitoff point to yield a total of 49,000 gallons of good products was $356,000 Product A may be processed further to yield 30,000 gallons (the remainder is shrinkage) of a special product: Product A1; for an additional processing cost of $60,000 per usable gallon. Product A1 can be sold for $10.50 per gallon. Product B may be processed further to yield 45,000 gallons (the remainder is shrinkage) of a special product: Product B1; for an additional processing cost of $90,000 per usable gallon. Product B1 can be sold for $6.75 per gallon. There are no beginning and ending inventory balances. Required: Calculate all ratios and percentages to 4 decimal places, for example, 33.3333%, and round all dollar amounts to the nearest whole dollar. 1. Allocate the joint product costs and then compute the cost per unit using each of the following methods: a. Physical measure b. Sales value at split-off c. Net realizable value d. Constant gross margin percentage

2. Calculate the total gross margin and the gross margin percentage for each product. 3. Which product, if any, do you think should have been processed beyond the split-off point. Why? 4. "What's the big concern about learning four different methods of cost allocation for joint products? The total cost does not change, and the real question that needs answering is whether to further process joint products or sell right away. Besides, the firm uses Just in time inventory, so there aren't any ending inventories to cost." Required: Comment on these ideas.