Requirenment 1

Joint Cost
Product NRV at Split-of Allocated

W-10 $ 336,000.00 $ 134,400.00

W-20 288,000.00 115,200.00

W-30 192,000.00 76,800.00

W-40 144,000.00 57,600.00

Total = $ 960,000.00 $ 384,000.00

Requirenment 2

Joint Cost
Product Units Produced Ratio
Allocated

W-10 56,000 0.35 $ 134,400.00

W-20 40,000 0.25 96,000.00

W-30 32,000 0.2 76,800.00

W-40 32,000 0.2 76,800.00

Total = 160,000 1 $ 384,000.00

 Requirenment 3

In general, accountants prefer to use the net realizable value method (NRV) of
joint cost allocation over ther physical quantites method (PH) because the NRV of
the ouput provides a measure of the economic benefits recevied from each output
produced. By contrast using the PH to allocate joint costs is advantageous if the
price of a product's output is not fixed, or volatile.

Notably, Deming & Sons will have the same profit margins on products W-10 and
W-30, irrespective of the method they use for allocating joint costs. Neither
product is relevant to this decision since the same costs are allocated to both
products under either method of joint cost allocation.

Therefore, the answer to this question turns on whether Deming & Sons sells
more units of W-20 or W-40.
Deming & Sons would prefer to use the NRV of joint cost allocation if they sell
more units of product W-40. This is because they could earn a gross profit of $2.70
from each unit of W-40 sold. Conversely, if they were to apply PH, then they could
only net a gross profit of $2.63 (rounded) per each unit sold. Hince, they should
sell W-40 at split-off because on these facts, they'd earn 7 cents more per each
unit of W-40 sold, or $2,400.00 more in total if they sell each of the 32,000 units
that were produced.

On the other hand, if Deming & Sons sells more units of product W-20, than they
could possibly earn a gross profit of $4.80 from each unit of W-20 sold by using PH
to allocate joint costs. Conversely, if they were to apply NRV, then they could only
net a gross profit of $4.32 per each unit of W-20 sold. Hince, they should sell W-20
after further production because on these facts, they'd earn 48 cents more per
each unit of W-20 sold, or $19,200.00 more in total from this product if they sell
each of the 40,000 units that were produced.

On balance, the $19,200.00 benifit that Deming & Sons could potentially gain from
product W-20 by using PH is $16,800 more valuable than the $2,400.00 of
additional profit that they could potentially gain from product W-40, by using NRV.
Hence, overall Deming & Sons should use PH to allocate their costs.