Question
Northwest Building Products (NBP) manufactures two lumber products from a joint milling process: residential building lumber (RBL) and commercial building lumber (CBL). A standard production
Northwest Building Products (NBP) manufactures two lumber products from a joint milling process: residential building lumber (RBL) and commercial building lumber (CBL). A standard production run incurs joint costs of $535,500 and results in 95,200 units of RBL and 142,800 units of CBL. Each RBL sells for $10 per unit and each CBL sells for $12 per unit.
Required:
1. Assuming that no further processing occurs after the split-off point, how much of the joint costs are allocated to commercial lumber (CBL) on a physical measure method basis?
2. If no further processing occurs after the split-off point, how much of the joint cost is allocated to the residential lumber (RBL) using a sales value at split-off method?
3. Assume that the CBL is not marketable at split-off but must be planed and sized at a cost of $357,000 per production run. During this process, 11,900 units are unavoidably lost and have no value. The remaining units of CBL are salable at $14 per unit. The RBL, although salable immediately at the split-off point, is coated with a tarlike preservative that costs $238,000 per production run. The RBL is then sold for $12 each. Using the net realizable value basis, how much of the completion costs should be assigned to each unit of CBL? ( Do not round intermediate calculations. Round final answer to 4 decimal places)
4. Based on information in requirement 3, should NBP choose to process RBL beyond split-off?
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