Northwest Building Products (NBP) manufactures two lumber products from a joint milling process: residential building lumber (RBL) and commercial building lumber (CB) A standard production run incurs joint costs of $450,000 and results in 80,000 units of RBL and 120,000 units of CB. Each RBL sells for $10.00 per unit and each CB sells for $12.00 per unit.

Data for analysis:
Joint costs, standard production run =				$450,000
Output (units), standard production run:
	MSB =			80,000
	CBL =			120,000
Selling prices per unit:
	MSB =			$10.00
	CBL =			$12.00
Separable processing costs:			RBL	CB
Part 1			$0.00	$0.00
Part 2			$0.00	$0.00
Part 3:
Separable process costs			$100,000	$200,000
Lost units (no value)				10,000
Sales value/unit, after furth proc			$5.00	$10.00

Required

1. Assuming that no further processing occurs after the split-off point, how much of the joint costs are allocated to commercial lumber (CB) on a physical measure method basis?

2. If not further processing occurs after the split-off point, how much of the joint cost is allocated to the mine support braces (RBL) on a sales value basis?

3. Assume that the CB is not marketable at split-off but must be planed and sized at a cost of $300,000 per production run. During the process, 10,000 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, are coated with a tarlike preservative that costs $200,000 per production run. The braces are then sold for $12 each. Using the net realizable value basis, how much of the completed cost should be assigned to each unit of CBL?

4. Should NBP choose to process the RBL beyond split-off? What would be the contribution if it did so?

Solution:

#1
Percent of Total			RBL	CB	Total
Joint Cost Allocation
#2			RBL	CB	Total
Sales Value
			RBL	CB	Total
Allocated Joint Costs
#3			RBL	CB	Total
Total Joint Cost
			RBL	CB	Total
Net Realizable Value
			RBL	CB	Total
Total cost
Total cost per unit