Hernandez Chemical Company's production process for two of its solvents can be diagrammed using a process map as shown in Exhibit 12-25.
The cost of the joint input, including processing costs before the split-off point, is $400,000. Solvent A can be sold at the split-off point for $20 per gallon and solvent B for $60 per gallon.
1. Allocate the $400,000 joint cost to solvents A and B by the physical-units method.
2. Allocate the $400,000 joint cost to solvents A and B by the relative-sales-value method.