Question: Michigan Timber uses a joint process to manufacture two grades of wood: A and B. During October 2010, the company incurred $12,000,000 of joint production

Michigan Timber uses a joint process to manufacture two grades of wood: A and B. During October 2010, the company incurred $12,000,000 of joint production cost in producing 18,000,000 board feet of Grade A and 6,000,000 board feet of Grade B lumber. The company allocates joint cost on the basis of board feet of lumber produced. The company can sell Grade A lumber at the split-off point for $0.80 per board foot. Alternatively, Grade A lumber can be further processed at a cost of $0.75 per board foot and then sold for $1.90 per board foot. No opportunity exists for processing Grade B lumber after split-off.

a. How much joint cost should be allocated to Grade A and to Grade B lumber?

b. If Grade A lumber is processed further and then sold, what is the incremental effect on Michigan Timber's net income? Should the additional processing be performed?

Step by Step Solution

★★★★★

3.45 Rating (177 Votes )

There are 3 Steps involved in it

1 Expert Approved Answer

Step: 1 Unlock

a Allocation rate 12000000 24000000 feet 050 per foot Grade A 050 x 18... View full answer

Question Has Been Solved by an Expert!

Get step-by-step solutions from verified subject matter experts

Step: 2 Unlock

Step: 3 Unlock

Document Format (1 attachment)

146-B-C-A-C-A (424).docx

120 KBs Word File

Students Have Also Explored These Related Cost Accounting Questions!

Oregon Forests uses a joint process to manufacture two grades of wood: A and B. During October 2013, the company incurred $ 16,200,000 of joint production cost in producing 27,000,000 board feet of...

Colorado Steak Company (CSC) uses a joint process to manufacture three types of beef: roasts, steaks, and ground beef. Each product can be sold at the point of separation, or it can be processed...

Natural Beauty Corp. uses a joint process to make two main products: Forever perfume and Fantasy lotion. Production is organized in two sequential departments: Combining and Heating. The products do...

(Physical measure allocation) Michigan Timber uses a joint process to manufacture two grades of wood: A and B. During October 2010, the company incurred $12,000,000 of joint production cost in...

Physical measure allocation and sell or process further Oregon Forests uses a joint process to manufacture two grades of wood: A and B . During October, the company incurred $ 4 8 , 6 0 0 , 0 0 0 of...

Physical measure allocation and sell or process further Oregon Forests uses a joint process to manufacture two grades of wood: A and B . During October, the company incurred $ 3 5 , 6 4 0 , 0 0 0 of...

Physical measure allocation and sell or process further Oregon Forests uses a joint process to manufacture two grades of wood: A and B. During October, the company incurred $16,200,000 of joint...

Oregon Forests uses a joint process to manufacture two grades of wood: A and B. During October, the company incurred $16,200,000 of joint production cost in producing 27,000,000 board feet of Grade A...

As a "Hair Salon Owner" Identify TEN (10) risks embedded in the operation of the business operation/organization. Try to come up with real-life risks related to the Hair Salon Business: Risk...

Mrs. Kwan withdrew the entire $8,000 balance from her Roth IRA this year. Her total contributions to the account were $6,070, and her marginal tax rate is 15 percent. Determine the tax cost of the...

Explain Put - Call parity relationship. What does put - call parity imply about the pricing of call and put options in an efficient market? Can you think of a real - world scenario where put - call...

13. Value of Perfect Information. The following profit payoff table was presented in Problem 1: State of Nature Decision Alternative s1 s2 s3 d1 250 100 25 d2 100 100 75 The probabilities for the...

Differentiate between committed and discretionary costs. Could a cost be considered discretionary by one firm and committed by another? If so, discuss and give an example. If not, discuss why not.

Idaho Industrial is a medium-size manufacturing corporation in a capital-intensive industry. Currently, actual profits are not meeting expectations. As a result, investment funds are limited and...

Brenda Barnes has just been appointed the new director of Youth Hot-Line, a not-for-profit organization that operates a phone bank for teen-age individuals experiencing emotional difficulties. The...

Cash Flows (dollars) Project Year: 0 1 2 3 4 A ?5,200 +1,200 +1,200 +2,800 0 B ?1,200 0 +1,200 +2,200 +3,200 C ?5,200 +1,200 +1,200 +2,800 +5,200 ________________________________________ a.What is...

The first question: If Al-Noor Company wants to ensure that the access rights to the procurement system are managed and that only authorized persons have access to the relevant information and check...

Susan Wang takes a long position in one March 2 0 2 4 Henry Hub Natural Gas contract ( NGH 4 ) at a price of $ 2 . 2 3 per MMBtu. If she closes out her position a month of week later when the price...