Allocating Joint Costs and Evaluating Overall Company Profit (Appendix). Elexor, Inc., produces two joint products, product A and product B. Prior to the split-off point, the company incurred $10,000 in joint costs. Production of product A totaled 400 pounds, and product B totaled 600 pounds. Product A sells for $60 per pound and product B sells for $10 per pound.
a. Allocate joint costs to each product using the physical quantities method (pounds), and calculate the profit or loss for each product.
b. Allocate joint costs to each product using the relative sales value method, and calculate the profit or loss for each product.
c. Using your answer to requirement a, describe what will happen to overall company profit if the least profitable product is eliminated.