Forrest Products buys cut trees and processes them into wood products. Each batch of trees that Forrest purchases for $500 can be converted for an additional $400 into 2,000 ft of rough sawn lumber and 200 bundles of bulk firewood. Rough sawn lumber can be sold at splitoff for $0.90 per foot, and the bulk firewood can be sold for $0.50 per bundle. Forrest can process the 2,000 ft of rough sawn lumber into 1,720 ft of dried, treated lumber for an additional cost of $800, and the firewood can be split into smaller pieces and bundled into 180 bundles for an additional cost of $200. Dried, treated lumber can be sold for $1.50 per foot. The 180 bundles of firewood can be sold for $2.50. per bundle.

Allocate the joint cost to the dried, treated lumber and the processed firewood bundles using the following:

Sales value at splitoff method

NRV method

Should Forrest process each of the products further or sell at spinoff? What effect does the allocation method have on this decision?