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 $390,000 and results in 80,000 units ofRBL and 100,000 units of CBL. Each RBL sells for $10 per unit andeach CBL sells for $15 per unit.

Required: 1. Assuming that no furtherprocessing occurs after the split-off point, how much of the jointcosts are allocated to commercial lumber (CBL) on a physicalmeasure 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 planned and sized at a cost of $270,000 per production run.During this process, 10,000 units are unavoidably lost and have novalue. The remaining units of CBL are salable at $17 per unit. TheRBL, although salable immediately at the split-off point, is coatedwith a tarlike preservative that costs $170,000 per production run.The RBL is then sold for $11 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?

a. Yes because it can charge a higher price for the residentiallumber after the additional processing.

b. Yes because total revenue for the residential lumber exceedsthe incremental cost of the additional processing.

c. No because the increase in sales revenue is less than theextra processing costs.

d. No because additional processing results in an unavoidableloss of 10,000 units of CBL.

1. Allocated joint cost	?
2. Allocated joint cost	?
3. How much of the completion costs should be assigned to eachunit of CBL?	?
4. Based on the information in requirement 3, should NBP chooseto process RBL beyond split-off?	?