Reference no: EM132557018

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 $300,000 and results in 60,000 units of MSB and 90,000 units of CBL. Each MSB sells for $2, and each unit of CBL sells for $4.

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

Question 2: Calculate the amount of joint cost allocated to the mine support braces (MSB) on a relative-sales-value basis. (CBL, allocation of joint cost: $225,000)

Question 3: Assume the commercial building lumber is not marketable at split-off but must be further planed and sized at a cost of $200,000 per production run. During this process, 10,000 units are unavoid-ably lost; these spoiled units have no value. The remaining units of commercial building lumber are saleable at $10 per unit. The mine support braces, although saleable immediately at the split-off point, are coated with a tarlike preservative that costs $100,000 per production run. The braces are then sold for $5 each. Using the net-realizable-value basis, compute the completed cost assigned to each unit of commercial building lumber. (MSB, net realizable value: $200,000)

Question 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?

Question 5: Did you use the joint cost allocation results in answering requirement (4)? If so, how? Why did you use or not use the allocation results?