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Physical measure allocation and sell or process further Oregon Forests uses a joint process...

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Accounting

Physical measure allocation and sell or process further
Oregon Forests uses a joint process to manufacture two grades of wood: A and B. During October, the company incurred $48,600,000 of joint production cost in producing 81,000,000 board feet of Grade A and 27,000,000 board feet of Grade B lumber. The company allocates joint cost on the basis of board feet of lumber produced. The company can sell Grade A lumber at the split-off point for $0.70 per board foot and Grade B lumber at the split-off point for $0.50 per board foot. Alternatively, Grade A lumber can be further processed at a cost of $0.75 per board foot and then sold for $1.50 per board foot. No opportunity exists for processing Grade B lumber after split-off.
a. How much joint cost should be allocated to Grade A and to Grade B lumber using the physical units method?
Grade A$
Grade B $
b.1. If Grade A lumber is processed further and then sold, what is the incremental effect on Oregon Forests' net income?
Processing further will result in ar
2. Should the additional processing be performed?
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