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Snake River Sawmill manufactures two lumber products from a joint milling process. The two products developed...

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Accounting

Snake River Sawmill manufactures two lumber products from ajoint milling process. The two products developed are mine supportbraces (MSB) and unseasoned commercial building lumber (CBL). Astandard production run incurs joint costs of $470,000 and resultsin 77,000 units of MSB and 107,000 units of CBL. Each MSB sells for$3, and each unit of CBL sells for $11.

  1. Assume the commercial building lumber is not marketable atsplit-off but must be further planed and sized at a cost of$557,800 per production run. During this process, 11,700 units areunavoidably lost; these spoiled units have no value. The remainingunits of commercial building lumber are saleable at $11.00 perunit. The mine support braces, although saleable immediately at thesplit-off point, are coated with a tarlike preservative that costs$270,000 per production run. The braces are then sold for $13.50each. Using the net-realizable-value basis, compute thecompleted cost assigned to each unit of commercial buildinglumber. (Round the calculation of "RelativeProportion" to the nearest whole percent. Round your final answerto 2 decimal places.)

Answer & Explanation Solved by verified expert
4.4 Ratings (905 Votes)

3 Joint Joint Sales Additional Net Realizable Relative Proportion    Allocation
Cost Products Value of Cost of Processing Value of Joint Cost
Final Product
$470,000 ?? MSB   $   1,039,500* $270,000 $        769,500 61% $286,700 (470000 x61% = 286700)
?? CBL   1,048,300** 557,800            490,500 39%           183,300 (470000 x39% = 183300)
?? Total   $     1,260,000 $470,000
*$13.50 x 77,000
**$11 x (107,000 – 11,700)
Unit cost will be allocated as follows:
Joint Cost allocated $      183,300
Addl. Processing cost          557,800
Total Cost $      741,100
÷ Good Units of CBL(107000-11700) ÷ 95300
Unit cost (741100 ÷ 95300) $                  7.78

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