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Guy Mills produces lumber in three sizes. The production manager is considering processing them farther by adding specific decorative finishes. The relevant information is listed
Guy Mills produces lumber in three sizes. The production manager is considering processing them farther by adding specific decorative finishes. The relevant information is listed below: Sales value at Additional Production Final sales Product Split-off per Processing (board feet) Value per unit unit Cost per unit Siding 1,325,500 $1.05 $0.25 $1.40 Flooring 4,036,500 $1.65 $0.60 $2.50 Studs 897.750 $0.75 $0.15 $0.95 The joint cost for Guy Mills is $ 1,300,000. In order for Guy Mills to determine whether they should process further they need to allocate the joint costs using the net realizable method. Using the NRV method complete the table below to allocate the joints cost to Siding, Flooring and Studs. Siding Flooring Studs Net realizable value $ $ Weighting $ $ Joint costs allocated Which products should Guy Products process farther? Net realizable value Weighting Joint costs allocated Which products should Guy Products process farther? Siding Flooring Studs Incremental Revenue Additional processing costs $ $ $ Increase/ (decrease) in income $
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