Cost Management: A Strategic Emphasis 7th Edition by Edward Blocher,David Stout ,Paul Juras,Gary Cokins

Exercise 41

Joint Products Northwest Building Products (NBP) manufactures two lumber products from a joint milling process: residential building lumber (RBL) and commercial building lumber (CBL). A standard production run incurs joint costs of $450,000 and results in 80,000 units of RBL and 120,000 units of CBL. Each RBL sells for $10 per unit and each CBL sells for $12 per unit.
Required
1. Assuming that no further processing occurs after the split-off point, how much of the joint costs are allocated to commercial lumber (CBL) on a physical measure method basis
2. If no further processing occurs after the split-off point, how much of the joint cost is allocated to the residential lumber (RBL) on a sales value basis
3. Assume that the CBL is not marketable at split-off but must be planed and sized at a cost of $300,000 per production run. During this process, 10,000 units are unavoidably lost and have no value. The remaining units of CBL are salable at $14 per unit. The RBL, although salable immediately at the split-off point, is coated with a tarlike preservative that costs $200,000 per production run. The RBL is then sold for $12 each. Using the net realizable value basis, how much of the completed cost should be assigned to each unit of CBL
4. Based on information in requirement 3 above, should NBP choose to process RBL beyond split-off
(CMA Adapted)