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 an $4 2. Should the additional processing be performed?
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 an $4 2. Should the additional processing be performed?
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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I have a cost accounting question
![**Oregon Forests Joint Production Process**
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.
---
**Questions**
**a. Allocation of Joint Cost**
How much joint cost should be allocated to Grade A and to Grade B lumber using the physical units method?
- Grade A: $ [Input Required]
- Grade B: $ [Input Required]
**b. Incremental Effect Calculation**
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 an [Select Increase/Decrease] of $ [Input Required]
2. Should the additional processing be performed?
- [Select Yes/No]
---
**Note:**
- The allocation of joint costs using the physical units method is done by assigning costs based on the proportion of total output in board feet each grade represents.
- The incremental effect on net income from further processing Grade A lumber involves calculating additional revenue minus additional processing costs.
This exercise illustrates cost allocation and decision-making in joint production processes.](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2Fd521ccc3-f206-42e4-a559-52e40dd0d7d1%2Ffea97987-a422-4b30-ab18-0a05747e05f0%2Fm2j73qn_processed.png&w=3840&q=75)
Transcribed Image Text:**Oregon Forests Joint Production Process**
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.
---
**Questions**
**a. Allocation of Joint Cost**
How much joint cost should be allocated to Grade A and to Grade B lumber using the physical units method?
- Grade A: $ [Input Required]
- Grade B: $ [Input Required]
**b. Incremental Effect Calculation**
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 an [Select Increase/Decrease] of $ [Input Required]
2. Should the additional processing be performed?
- [Select Yes/No]
---
**Note:**
- The allocation of joint costs using the physical units method is done by assigning costs based on the proportion of total output in board feet each grade represents.
- The incremental effect on net income from further processing Grade A lumber involves calculating additional revenue minus additional processing costs.
This exercise illustrates cost allocation and decision-making in joint production processes.
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