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Q1) Sonimad Sawmill produces two lumber products from joint milling process. Two products developed are mine support braces (MSBs) and unseasoned commercial building lumber (CBL).  Standard production run incurs joint costs of $300,000 and results in 60,000 units of MSB and 90,000 units of CBL. Each unprocessed unit of MSB sells for $2 per unit and each unprocessed unit of CBL sells for $4 per unit.

If CBL is processed further at cost of $200,000, it can be sold at $10 per unit but 10,000 units are unavoidably lost (with no discernible value). MSB units can be coated with preservative at cost of= $100,000 per production run and then sold for $3.50 each.

a) If no extra work is done after initial milling process, compute cost of CBL by using physical quantities to assign the joint cost.

b) If no extra work is done after initial milling process, compute cost of MSB using relative sales value to assign joint cost.

c) Must MSB and CBL be processed further or sold immediately after initial milling?

d) Given your decision in (c), make a schedule calculating completed cost assigned to each unit of MSB and CBL as charged to finished goods inventory. Utilize net realizable value for allocating joint costs.

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  • Category:- Accounting Basics
  • Reference No.:- M918947

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