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Allegheny 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 $800,000 and results in 65,000 units of MSB and 95,000 units of CBL. Each MSB sells for $10, and each unit of CBL sells for $15.

Required:

1. Calculate the amount of joint cost allocated to commercial building lumber (CBL) on a physical-units basis. (Round the calculation of relative proportions to four decimal places.)

2. Calculate the amount of joint cost allocated to the mine support braces (MSB) on a relative-sales value basis. (Round the calculation of relative proportions to two decimal places of percentage.)

3. Assume the commercial building lumber is not marketable at split-off but must be further planed and sized at a cost of $1,185,000 per production run. During this process, 10,500 units are unavoidably lost; these spoiled units have no value. The remaining units of commercial building lumber are saleable at $30.00 per unit. The mine support braces, although saleable immediately at the split-off point, are coated with a tarlike preservative that costs $300,000 per production run. The braces are then sold for $15.00 each. Using the net-realizable-value basis, compute the completed cost assigned to each unit of commercial building lumber. (Do not round intermediate calculations. Round your answer to 2 decimal places.)

4. If Allegheny River Sawmill chose not to process the mine support braces beyond the splitoff point, the contribution from the joint milling process would increase or decrease by what amount?

5. Which of the following statements is true?

a. 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.

b. 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.