Northwest Building Products (NBP) manufactures two lumberproducts from a joint milling process: residential building...

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Northwest Building Products (NBP) manufactures two lumberproducts from a joint milling process: residential building lumber(RBL) and commercial building lumber (CBL). A standard productionrun incurs joint costs of $350,000 and results in 100,000 units ofRBL and 90,000 units of CBL. Each RBL sells for $13 per unit andeach CBL sells for $13 per unit.
Required:
1. Assuming that no further processing occurs after thesplit-off point, how much of the joint costs are allocated tocommercial 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) using a sales value at split-off method?
3. Assume that the CBL is not marketable at split-off but mustbe planed and sized at a cost of $180,000 per production run.During this process, 10,000 units are unavoidably lost and have novalue. The remaining units of CBL are salable at $14 per unit. TheRBL, although salable immediately at the split-off point, is coatedwith a tarlike preservative that costs $280,000 per production run.The RBL is then sold for $15 each. Using the net realizable valuebasis, how much of the completion costs should be assigned to eachunit of CBL?
4. Based on information in requirement 3, should NBP choose toprocess RBL beyond split-off?

Answer & Explanation Solved by verified expert

4.2 Ratings (542 Votes)

1)
	RBL	CBL	Total
Units of Production	100000	90000	190000
Percentage of Total	52.63%	47.37%
Allocated Joint Cost	$184,210.53	$165,789.47	$350,000.00

2)	RBL	CBL	Total
Units of Production	100000	90000
Sales Price	$13.00	$13.00
Sales Value of Production	$1,300,000.00	$1,170,000.00	$2,470,000.00
Less: Separable Costs	0	0	0
New Realizable Value	$1,300,000.00	$1,170,000.00	$2,470,000.00
Percentage of Total NRV	52.63%	47.37%
Allocated Joint Cost	$184,210.53	$165,789.47	$350,000.00

3)	RBL	CBL	Total
Units of Production	100000	90000
Lost Untis		10000
Sales Price	$15.00	$14.00
Sales Value of Production	$1,500,000.00	$1,120,000.00	$2,620,000.00
Less: Separable Costs	$280,000.00	$180,000.00
New Realizable Value	$1,220,000.00	$940,000.00	$2,160,000.00
Percentage of Total NRV	56.48%	43.52%
Allocated Joint Cost	$197,685.19	$152,314.81	$350,000.00
Plus: Separable Costs	$280,000.00	$180,000.00
Total Costs	$477,685.19	$332,314.81
Units Produced	100000	80000
Cost Per Unit	$4.78	$4.15

4)
Yes, NBD should process further

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Transcribed Image Text

In: AccountingNorthwest Building Products (NBP) manufactures two lumberproducts from a joint milling process: residential building lumber...Northwest Building Products (NBP) manufactures two lumberproducts from a joint milling process: residential building lumber(RBL) and commercial building lumber (CBL). A standard productionrun incurs joint costs of $350,000 and results in 100,000 units ofRBL and 90,000 units of CBL. Each RBL sells for $13 per unit andeach CBL sells for $13 per unit.Required:1. Assuming that no further processing occurs after thesplit-off point, how much of the joint costs are allocated tocommercial 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) using a sales value at split-off method?3. Assume that the CBL is not marketable at split-off but mustbe planed and sized at a cost of $180,000 per production run.During this process, 10,000 units are unavoidably lost and have novalue. The remaining units of CBL are salable at $14 per unit. TheRBL, although salable immediately at the split-off point, is coatedwith a tarlike preservative that costs $280,000 per production run.The RBL is then sold for $15 each. Using the net realizable valuebasis, how much of the completion costs should be assigned to eachunit of CBL?4. Based on information in requirement 3, should NBP choose toprocess RBL beyond split-off?