A company purchases and processes 15,000 gallons of raw material at a cost of $60,000. From this process, it produces 1,200 pounds of JP1 and 1,800 pounds of JP2. JP1 can be sold for $21 per pound or processed further into 12,000 units of FP1 at a total cost of $12,750. FP1 has a selling price of $4 per unit. JP2 can be sold for $26 per pound or processed further into 20,400 units of FP2 at a total cost of $26,250. FP2 has a selling price of $5 per unit. Assume that the company sells only FP1 and FP2. In other words, it further processes both joint products. Also, assume there is no beginning or ending inventory.
a) Allocate the joint costs to JP1 and JP2 using the physical measure method (based on pounds), sales value at split off method, the NRV method, and the constant gross margin percentage NRV method.
b) Is it a good idea for the firm to further process the joint products? Be sure to justify your conclusions with specific calculations.