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Chapter 17, Problem 27P 1 Bookmark Show all steps: ON

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Problem

Snake River Sawmill manufactures two lumber products from a joint milling process. The two Continue to post
products developed are mine support braces (MSB) and unseasoned commercial building 20 questions remaining
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 MSB sells for $2 and each unit of CBL sells for $4.

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1. Calculate the amount of joint cost allocated to commercial building lumber (CBL) on a physical phone to post a question
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2. Calculate the amount of joint cost allocated to the mine support braces (MSB) on a relative-
sales value basis.
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3. Assume the commercial building lumber is not marketable at split-off but must be further
planed and sized at a cost of $200,000 per production run. During this process, 10,000 units are
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unavoidably lost; these spoiled units have no value. The remaining units of commercial building a one-time automated text message with a link to
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lumber are saleable at $10 per unit. The mine support braces, although saleable immediately at
the split-off point, are coated with a tarlike preservative that costs $100,000 per production run.
The braces are then sold for $5 each. Using the net-realizable-value basis, compute the
completed cost assigned to each unit of commercial building lumber. My Textbook Solutions
4. If Snake River Sawmill chose not to process the mine support braces beyond the split–off
point the contribution from the joint milling process would increase or decrease by what amount?

5. Did you use the joint cost allocation result in answer in requirement (4)? If so how? Why did
you use or not use the allocation result?
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Step 1 of 5

2. Allocation of cost based on relative Sales values:

Relative sales value:

Ratio of sales: 25 %: 75 %

Hence allocation of cost based on relative sales value is as below:

Commercial Building Lumber........ ............. $225,000

Mine Support Braces……….. ........ … ... ... $75,000

Comment

Step 2 of 5

3. Net Realizable value:

Details CBL MSB

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11/17/21, 10:36 AM Solved: Snake River Sawmill manufactures two lumber products fr... | Chegg.com

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Less: Additional cost $200,000.00 $100,000.00

Net realizable value $600,000.00 $200,000.00

Note* =

Allocation of cost based per unit on Net realizable Value for CBL and MBS:

Details CBL MSB

Building Cost Allocated $225,000.00 $75,000.00

Add: Additional cost post split up $200,000.00 $100,000.00

Total Cost $425,000.00 $175,000.00

Units produced 80,000 60,000

Net Cost allocated per unit $5.30 $2.91

Calculation of contribution:

Details CBL MSB

Sales $800,000.00 $120,000.00

Less: Cost post Split off $200,000.00 -

Contribution $600,000.00 $120,000.00

Comment

Step 3 of 5

Change in Contribution , hence if Mine Support Braces is not

processed further, contribution decreases by $80,000.

Comment

Step 4 of 5

4. If the company S chose not to process the Mine Support Braces beyond the split off point,
then the contribution from joint milling process will increase by $80,000.

Comment

Step 5 of 5

5. We use the joint cost allocation results in answering 4 above. Joint cost is $300,000 which is
allocated to Commercial Building Lumber and Mine Support Braces based on relative sales

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11/17/21, 10:36 AM Solved: Snake River Sawmill manufactures two lumber products fr... | Chegg.com
value. Joint cost allocation is used to find out the profitability of each product Commercial
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