Martin, Inc. produces products MP-1 and MP-2 from a joint process costing $2,000 per 1,000 kilograms of input. A 1,000-kilogram batch produces 300 units of MP-1 and 200 units of MP-2. MP-1 can be processed further for $150, and MP-2 for $250. Sales prices after further processing are $5 and $7 per unit, respectively.
a)Determine the gross margin for each product, assuming Martin allocates joint costs using the physical output method.
For parts (b)through (d), assume Martin could buy a higher grade of the input material for $3,000 per 1,000 kilograms. The higher grade material would increase MP-1's separable costs to $400, and MP-2's unit selling price would become $15.
b)Would the MP-1 manager want the better quality material to be purchased? Provide computations to support your answer.
c)Would the MP-2 manager want the better quality material to be purchased? Provide computations to support your answer.
d)Would the chief executive officer of Martin, Inc. want the better quality material to be purchased? Provide computations to support your answer.

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The Answer of Martin, Inc. produces products MP-1 and MP-2 from a joint process costing $2,000 per 1,000 kilograms of input. A 1,000-kilogram batch produces 300 units of MP-1 and 200 units of MP-2. MP-1 can be processed further for $150, and MP-2 for $250. Sales prices after further processing are $5 and $7 per unit, respectively.
a)Determine the gross margin for each product, assuming Martin allocates joint costs using the physical output method.
For parts (b)through (d), assume Martin could buy a higher grade of the input material for $3,000 per 1,000 kilograms. The higher grade material would increase MP-1's separable costs to $400, and MP-2's unit selling price would become $15.
b)Would the MP-1 manager want the better quality material to be purchased? Provide computations to support your answer.
c)Would the MP-2 manager want the better quality material to be purchased? Provide computations to support your answer.
d)Would the chief executive officer of Martin, Inc. want the better quality material to be purchased? Provide computations to support your answer.