Sunnyside Sawmill manufactures two lumber products from a joint milling process. The two products developed are 1) mine support braces (MSB) and 2) unseasoned commercial building lumber (CBL). A standard production run incurs joint costs of $300,000 and results in 60,000 units of MSB and $90,000 units of CBL. Each unprocessed unit of MSB sells for $2.00 per unit and each unprocessed unit of CBL sells for $4.00 per unit.

If the CBL is processed further at a cost of $200,000, it can be sold at $10.00 per unit but 10,000 units are unavoidably lost (with no discernible value). The MSB units can be coated with a preservative at a cost of $100,000 per production run and then sold for $3.50 each.

Required:

1) Create a table and determine which product(s) should be sold at the split-off point and which product(s) should be processed further. (Hint: you should solve using total revenues and total costs, and not on a per unit basis do too big unit loss on the CBL's)

2) Based on your solution, allocate the joint product costs to the products using the net realizable value approach, and determined operating profit by product line and in total.