Question

Snake River Sawmill manufactures two lumber products from a joint milling process. The two products developed are mine support braces (MSB) and unseasoned commercial building lumber (CBL). A standard production run incurs joint costs of $450,000 and results in 75,000 units of MSB and 105,000 units of CBL. Each MSB sells for $9, and each unit of CBL sells for $17.

1. Calculate the amount of joint cost allocated to commercial building lumber (CBL) on a physical-units basis. (Round the calculation of "Relative Proportion" to the nearest whole percent. Round your final answers to the nearest dollar amount.)
2. Calculate the amount of joint cost allocated to the mine support braces (MSB) on a relative-sales value basis. (Round the calculation of "Relative Proportion" to the nearest whole percent. Round your final answers to the nearest dollar amount.)

3. Assume the commercial building lumber is not marketable at split-off but must be further planed and sized at a cost of $529,000 per production run. During this process, 11,500 units are unavoidably lost; these spoiled units have no value. The remaining units of commercial building lumber are saleable at $17.00 per unit. The mine support braces, although saleable immediately at the split-off point, are coated with a tarlike preservative that costs $250,000 per production run. The braces are then sold for $12.50 each. Using the net-realizable-value basis, compute the completed cost assigned to each unit of commercial building lumber. (Round the calculation of "Relative Proportion" to the nearest whole percent. Round your final answer to 2 decimal places.)

4. If Snake River Sawmill chose not to process the mine support braces beyond the split-off point, the contribution from the joint milling process would increase or decrease by what amount?

Answer 1

Please note allocation is based on whole percentage