Allocating Joint Costs (Appendix). Fruit Tree Nursery (FTN) grows peach and apple trees in containers for its customers. This past year, FTN grew 3,000 peach trees and 7,000 apple trees at a cost of $100,000. FTN can sell peach trees for $20 each and apple trees for $11 each.
a. Allocate joint costs to each product using the physical quantities method, 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. Assume peach trees can be processed further by allowing them to grow for another few months. The additional processing cost is $4 per tree, and customers are willing to pay $23 for the larger trees. Should FTN process the peach trees further? Explain.