1. A company produces tow products from logs, grade a lumber and grade b lumber.
ID: 2463395 • Letter: 1
Question
1. A company produces tow products from logs, grade a lumber and grade b lumber. Joint costs are $180000. Grade A lumber has a sale value at split-off of $252000 and Grade Blumber has a sales value of $378000. Using the sales value method allocate the joint costs to the two products. 2.
2. A company produces two products from logs, grade A and grade B lumber. Grade A lumber is not sold at split-off point but is processed further with additional costs of $98000 into Grade AA lumber. It then has a sales value of $260000. Grade B is still sold at split-off for $378000. Using the net realizable sales value method allocate the joint costs of $180000.
3. A company produces two products from logs, Grade A and Grade B lumber. The company produces 1400 board feet of grade A and 1960 board feet of Grade B. joint costs of $180000 are allocated using the physical quantities metod. Calculate the amount allocated to Grade A and Grade B lumber.
4. A company can sell grade B lumber for $378000 at the split-off or can process it further into Grade BB lumber. The additional processing would be $20000 and the revenue from Grade BB lumber would be $416000. Should the company sell Grade B lumber or process it further?
Explanation / Answer
Answer 1
Grade A
Grade B
Total
Sale value at splitoff (1)
252000
378000
630000
Joint cost (1)/630000)*180000
72000
108000
180000
Gross margin
180000
270000
450000
Answer 2
Grade A
Grade B
Total
Sale value
260000
378000
Additional cost
98000
0
Net realisable value (1)
162000
378000
540000
Joint cost (1)/540000)*180000
54000
126000
180000
Gross margin
108000
252000
360000
Answer 3
Grade A
Grade B
Total
Production ( Feet) (1)
1400
1960
3360
Joint cost (1)/3360)*180000
75000
105000
180000
Answer 4 - process it further
Grade BB
Additional revenue (416000-378000)
38000
Additional cost
20000
Gross margin
18000
Answer 1
Grade A
Grade B
Total
Sale value at splitoff (1)
252000
378000
630000
Joint cost (1)/630000)*180000
72000
108000
180000
Gross margin
180000
270000
450000
Answer 2
Grade A
Grade B
Total
Sale value
260000
378000
Additional cost
98000
0
Net realisable value (1)
162000
378000
540000
Joint cost (1)/540000)*180000
54000
126000
180000
Gross margin
108000
252000
360000
Answer 3
Grade A
Grade B
Total
Production ( Feet) (1)
1400
1960
3360
Joint cost (1)/3360)*180000
75000
105000
180000
Answer 4 - process it further
Grade BB
Additional revenue (416000-378000)
38000
Additional cost
20000
Gross margin
18000
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