Problem 17-27 Joint Costs (LO 17-4, 17-5)

[The following information applies to the questions displayed below.]

Snake River Sawmill manufactures two lumber products from a joint milling process. The two products developed are mine support braces (MSB) and unseasoned commercial building lumber (CBL). A standard production run incurs joint costs of $460,000 and results in 76,000 units of MSB and 106,000 units of CBL. Each MSB sells for $2, and each unit of CBL sells for $10.

Problem 17-27 Part 5

5. Which of the following statements is true?

• The allocation of joint costs is irrelvant to the decision about coating the mine support braces. The decision should be based entirely on information pertaining to events from the split-off point forward.

• The joint cost allocation results should be used in the decision about coating the mine support braces because the decision should be based on total costs, i.e., costs incurred prior to split-off as well as those incurred post split-off.