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This is a question from Becker B1 on joint product costs. Are the exam questions long like this one? And it’s not just the question that is long. The solution goes thru several steps to get to the answer.
Sonimad Sawmill manufactures two lumber products from a joint milling process. The two products developed are 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, each CBL sells for $4 per unit.
Continuing with the previous data, 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 unavoidably lost; these spoiled units have no discernable value. The remaining units of commercial building lumber are saleable at $10.00 per unit. The mine support braces, although saleable immediately at the split-off point, are coated with a tar-like preservative that costs $100,000 per production run. The braces are then sold for $5 each.
Using the net realizable value (NRV) basis, the completed cost assigned to each unit of commercial building lumber would be:
a. $2.92
b. $5.625
c. $5.3125
d. Some amount other than those given above.
Thanks.
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