# Sonimad Sawmill manufactures two lumber products from a joint mi

Sonimad Sawmill manufactures two lumber products from a joint milling process: mine support braces (MSB) and 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 MSB sells for \$2 per unit, and each CBL sells for \$4 per unit.

 Data for analysis: Joint costs, standard production run = \$300,000 Output (units), standard production run: MSB = 60,000 CBL = 90,000 Selling prices per unit: MSB = \$2.00 CBL = \$4.00 Separable processing costs: MSB CBL Part 1 \$0 \$0.00 Part 2 \$0 \$0.00 Part 3: Separable process costs \$100,000 \$200,000 Lost units (no value) 10,000 Sales value/unit, after furth proc \$5.00 \$10.00

Required

1. Assuming that no further processing occurs after the split-off point, how much of the joint costs are allocated to commercial building lumber (CBL) on a physical measure method basis?

2. If no further processing occurs after the split-off point, how much of the joint cost is allocated to the mine support braces (MSB) on a sales value basis?

3. Assume that the CBL is not marketable at split-off but must be planed and sized at a cost of \$200,000 per production run. During this process, 10,000 units are unavoidably lost and have no value. The remaining units of CBL are salable at \$10 per unit. The MSB, although salable 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, how much of the completed cost should be assigned to each unit of CBL?

4. Should Sonimad Sawmill choose to process the MSB beyond split-off? What would be the contribution if it did so?

Related Book For

Cost management a strategic approach

5th edition

Authors: Edward J. Blocher, David E. Stout, Gary Cokins

ISBN: 978-0073526942

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