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Northwest Building Projects manufactures two lumber products from a joint milling process: residential building lumber and commerical...

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Accounting

Northwest Building Projects manufactures two lumber productsfrom a joint milling process: residential building lumber andcommerical building lumber. A standard production run incurs jointcosts of $350,000 and results in 120,000 units of residentialbuilding lumber and 120,000 units of commercial building lumber.Each residential building lumber sells for $12 per unit and eachcommerical building lumber sells for $8 per unit.

1) Assume that the CBL is not marketable at split-off but mustbe planed and sized at a cost of $220,000 per production run.During this process, 10,000 units are unavoidably lost and have novalue. The remaining units of CBL are salable at $10 per unit. TheRBL, although salable immediately at the split-off point, is coatedwith a tarlike preservative that costs $250,000 per production run.The RBL is then sold for $13 each. Using the net realizable valuebasis, how much of the completion costs should be assigned to eachunit of CBL?

Answer & Explanation Solved by verified expert
3.6 Ratings (435 Votes)
Calculation of Net Realizable Value Particulars CBL RBL Selling price per unit at final point 10 13 Units Total unitslost units 110000 units 120000 units Total    See Answer
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