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 $350,000 and results in 65,000 units of MSB and 95,000 units of CBL. Each MSB sells for $4, and each unit of CBL sells for $9.

1. Calculate the amount of joint cost allocated to commercial building lumber (CBL) on a physical-units basis

2. Calculate the amount of joint cost allocated to the mine support braces (MSB) on a relative-sales value basis.

3. Assume the commercial building lumber is not marketable at split-off but must be further planed and sized at a cost of $385,000 per production run. During this process, 10,500 units are unavoidably lost; these spoiled units have no value. The remaining units of commercial building lumber are saleable at $15.00 per unit. The mine support braces, although saleable immediately at the split-off point, are coated with a tarlike preservative that costs $150,000 per production run. The braces are then sold for $7.50 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

Q1 $350,000 Total Joint Cost = Units Produced CBL = MSB = Total = 95,000 units 65,000 units 160,000 units Joint Cost for CBL (Physical Unit basis) - Total Joint cost & Crits of CBL Total units Boduced = 3,50,000 x 95,000 1160,000 $2,07,812.5 = Q.2 Jount Cost on the basis of Relative Sales Value 1 Product Units 65,000 T Sales Price Sales Value | 2,60,000 8,55,000 1,115,000 MSB CBL Total Joint cost Allocated 81,614.35 268,385.65 3,50,000 0 95,000 1160,000 0 0 0 Joint cost 0 0 for MSB = Total Joint cost & Sales value of MSB Total Sales value = 3,50,000 X d, 60,000 1,115,000 = $ 81,614.35 0 0 0 9

84,500 Product CBL MSB Units 95,000 65,000 less: Units lost (10,500) Net Available units 65,000 Sales Price Per Unit $15 $7.5 Sales value (A) I $1,267,500 $4,87,500 further processing Cost (B) | $385,000 $1,50.000 Net Realisable Value (A-B) | $882,500 $337,500 Relative Propostion (%) 8,82,500 882500+ 3,37,500 72% Joint Cost Assignable $3,50,000 X72% to CBL = $ 2,52,000 further Processing cost $3,85,000 Total cost $ 6,37,000 Units 84,500 Total cost per unit I $7.54 per unit)

®.4 If Snake River sawmill choose not to process the mine suppost Blaces (MSB) beyond split off point, the contribution will decrease by:- Incremental Revenue ($7.5-$40 x 65000 units - $ 297,500 = ($ 1,50,000) less: Incremental Sulther cast contribution lost = $ 77,500 company w ould lose $7,500 contribution from MSB. I Hope u liked my answel & if you do Don't forget to give Thumb's up. ]

Answer 2

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