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Trans-Pacific Lumber runs a mill in the Northwest that produces two grades of lumber, A and B, and a by-product, sawdust. The company chooses to
Trans-Pacific Lumber runs a mill in the Northwest that produces two grades of lumber, A and B, and a by-product, sawdust. The company chooses to allocate the costs on the basis of the physical quantities method. Last month, it processed 135,000 logs at a total cost of $360,000. The output of the process consisted of 35,000 units of grade A, 52,000 units of grade B, and 16,000 units of sawdust. The sawdust can be sold for $38,100. This is considered to be its net realizable value, which is deducted from the processing costs of the main products. Required: What share of the joint costs should be assigned to grade A and grade B? (Do not round intermediate calculations.) Joint costs Product Grade A Grade B The following questions relate to Kyle Company, which manufactures products KA, KB, and KC from a joint process. Joint product costs were $186,000. Additional information follows: If Processed Further Sales Value at Split- Product Off KA Units Produced 67,000 73,000 37,000 Sales Values $ 460,000 400,000 370,000 $ 370,000 340,000 280,000 Additional Costs $67,000 55,000 43,000 KB KC After the publication of recent scientific test results, the government has banned the sale of product KC. IF KC is produced, it must be disposed of in an approved way that costs $192,000 for every 37,000 units produced. Required: a. Assuming that Kyle Company continues to use the physical quantities method of allocation, what joint costs will be allocated to KA and to KB, respectively? (Do not round intermediate calculations.) Product Joint costs KA KB b. Which, if either, product would you recommend Kyle Company sell at split-off? O KA O KB O None of the above
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