Question

Problem 17-27 Joint Costs (LO 17-4, 17-5)

[The following information applies to the questions displayed below.]

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 $460,000 and results in 76,000 units of MSB and 106,000 units of CBL. Each MSB sells for $2, and each unit of CBL sells for $10.

Problem 17-27 Part 3

3. Assume the commercial building lumber is not marketable at split-off but must be further planed and sized at a cost of $543,400 per production run. During this process, 11,600 units are unavoidably lost; these spoiled units have no value. The remaining units of commercial building lumber are saleable at $10.00 per unit. The mine support braces, although saleable immediately at the split-off point, are coated with a tarlike preservative that costs $260,000 per production run. The braces are then sold for $13.00 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.)

Answer 1

Answer is given below with all working

Allocation based on Net Realisable Value Total MSB CBL Final Sales Units Final Selling price Final Sales Value Less: Further processing costs Net Realisable value NRV % Less: Joint cost allocated based on NRV Net Profit 94,400 76,000 170,400 $13 $10 $988,000 $944,000 $1,932,000 $260,000 $543,400 $803,400 $728,000 $400,600 $1,128,600 65% 35% 100% $296,722 $163,278 $460,000 $668,600 $431,278 $237,322 Joint Cost allocated to CBL Further processing cost $1.73 $5.76 Total Cost per unit $7.49