King Kong Products produces fractionated coconut oil in a single process that results in two major categories of fatty acids: Lauric Acid which is used for industrial and medical purposes and MCTs (medium chain triglycerides), which are various other medium chain fatty acids used in medical applications, special foods, and cosmetics. The joint costs incurred are $800,000 for a standard production run that generates 600,000 pounds of Lauric Acid and 400,000 pounds of MCTs. Lauric Acid sells for $4.00 per pound and the MCTs sell for an average of $9.00 per pound. Additional processing costs beyond the split off point are $1.00 per pound for Lauric Acid and $1.50 per pound for the MCTs.
1. The amount of joint cost of each production run allocated to the MCTs on an estimated net-realizable value (NRV) basis is:
2. Using the constant gross margin NRV method, the amount of joint cost allocated to Lauric Acid is: