Alternative methods of joint cost allocation, product-mix decision. Pacific Lumber processes lumber products for sale to lumber wholesalers. Its most popular line is oak prod¬

ucts. Oak tree growers sell Pacific Lumber whole trees. These trees are jointly processed up to the splitoff point at which raw select oak, raw white oak, and raw knotty oak become separable products. Each of these raw products is then separately further processed by Pacific Lumber into finished products (select oak, white oak, and knotty oak) that are sold to lumber whole¬

salers. Data for August 2007 are

a. Joint processing costs (including cost of oak trees) $360,000

b. Separable product at splitoff point Raw select oak 30,000 board feet Raw white oak 50,000 board feet Raw knotty oak 20,000 board feet

c. Final product produced and sold Select oak 25,000 board feet at $19.20 per board foot White oak 40,000 board feet at $10.80 per board foot Knotty oak 15,000 board feet at $8.40 per board foot

d. Separable processing costs For select oak $72,000 For white oak $108,000 For knotty oak $18,000 There is an active market for raw oak products. Selling prices available in August 2007 were raw select oak ($9.60 per board foot), raw white oak ($4.80 per board foot), and raw knotty oak ($3.60 per board foot). joint products and There were no beginning or ending inventories for August 2007.

Required 1. Allocate the joint costs to the three products using the

a. sales value at splitoffmethod.

b. physical-measure method.

c. estimated net realizable value method.
2. Assume that not all final product produced in August 2007 was sold. Ending inventory for August 2007 was select oak (1,000 board feet), white oak (2,000 board feet), and knotty oak (500 board feet). What would be the ending inventory values in the August 30 balance sheet under each product for each of the three methods in requirement 1?
3. Is Pacific Lumber maximizing its total August 2007 operating income by fully processing each raw oak product into its finished product form? Show computations.