Sub: Accounts Topic: Cost Accounting
Decision making as to process further or sale out.
ClassOf1 provides expert guidance to College, Graduate, and High school students on homework and assignment problems in
Math, Sciences, Finance, Marketing, Statistics, Economics, Engineering, and many other subjects.
Sonimad Sawmill manufactures two lumber products from a joint milling process. The two
products developed are mine support braces (MSBs) 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 unprocessed unit of MSB sells for $2 per unit and
each unprocessed unit of CBL sells for $4 per unit.
If the CBL is processed further at a cost of $200,000, it can be sold at $10 per unit but 10,000
units are unavoidably lost (with no discernible value). The MSB units can be coated with a
preservative at a cost of $100,000 per production run and then sold for $3.50 each.
a) If no further work is done after the initial milling process, calculate the cost of CBL using
physical quantities to allocate the joint cost.
b) If no further work is done after the initial milling process, calculate the cost of MSB using
relative sales value to allocate the joint cost.
c) Should MSB and CBL be processed further or sold immediately after in