Question

Prescott Lumber processes logs into grade A and grade Blumber. Logs cost $18,200 per load. The milling process produces 5,000 units of grade A with a market value of $86,800, and 20,000 units of grade B with a market value of $12,400. The cost of the milling process is $17.000 per load. Required: a. If the costs of the logs and the milling process are allocated on the basis of units of output, what cost will be assigned to each product? b. If the costs of the logs and the milling process are allocated on the basis of the net realizable value, what cost will be assigned to each product? c-1. How much profit or loss does the grade Blumber provide using the data in this problem and your analysis in requirement ()? c-2. Is it really possible to determine which product is more profitable? Complete this question by entering your answers in the tabs below. Rega Req RegB Reg C Reg C2 If the costs of the logs and the milling process are allocated on the basis of units of output, what cost will be assigned to each product? (Do not round intermediate calculations.) Cost Allocation Grade A Grade B

Answer 1

Answer:

A)

Cost Allocation on the basis of units output:

Cost per logs (A)	18200
Cost of milling process per load (B)	17000
Total Cost (C=A+B)	35200
Output of Grade A (units)(D)	5000
Output of Grade B (units)(,E)	20000
Total Output(F=D+E)	25000

Now we will find the Cost Allocation Grade A and Cost Allocation Grade B as under

Cost Allocation Grade A	7040
(35200*5000/25000)
Cost Allocation Grade B	28160
(35200*20000/20000)

B)

Cost Allocation on the basis of net realizable value:

Cost per logs(A)	18200
Cost of milling process per load(B)	17000
Total Cost (C=A+B)	35200
Net Realizable Value of Grade A(D)	86800
Net Realizable Value of Grade B)(,E)	12400
Total Realizable Value(F=D+E)	99200

Now we will find the Cost Allocation Grade A and Cost Allocation Grade B as under

Cost Allocation Grade A	30800
(35200*86800/99200)
Cost Allocation Grade B	4400
(35200*12400/99200)

C-1)

Profit or Loss from Grade B lumber from analysis of (a):

Total realizable value from Grade B	12400
Less: Cost allocated to Grade B	28160
Loss from Grade B	-15,760.00

C-2)

No

Explanation to the answer:

Here it is not possible to determine that which product is more profitable because here both the product are produced to gather so only single product can not be produced so  we only can calculate the total cost and total profitability