1. When two or more products are produced from a single input, these products are called joint products. The cost of this single input and the related manufacturing process costs are called joint costs. For example, lumber companies often must deal with joint products (different types of lumber) resulting from one input (a log). How do the concepts of joint products and joint costs help a lumber company establish a cost for each of its products?
2. The physical quantities method allocates joint costs based on a physical measure of output. Assume Oregon Lumber produces 600,000 board feet of Grade A lumber and 200,000 board feet of Grade B lumber during June. How would Oregon Lumber use this information to allocate $250,000 in joint production costs to each grade of lumber?
3. A different approach to allocating joint costs to joint products is the sales value method, which allocates joint costs based on the relative sales value of each product at the split-off point. How would Oregon Lumber allocate joint production costs using this method?