Reference no: EM132760915

Problem - Joint Cost Allocation - Guybrush Enterprises produces two types of particle board: high and low density. Both types of wood go through a joint production process where wood chips are milled and mixed with resin, wax, water, and glue. The joint process costs a total of $150 per batch. After the split-off point, high-density wood goes through an additional compression process, whereas low-density wood is immediately sold for $2 per square foot. One batch produces 200 square feet of low-density wood and 120 square feet of high-density wood. The additional processing of the high-density wood costs $135 per batch, and the high-density wood is then sold for $3 per square foot.

Required -

a. Determine the joint production cost to be allocated to the low- and high-density wood using the physical units method.

b. Determine the joint production cost to be allocated to the low- and high-density wood using the net realizable value method.

c. Which method provides more accurate costing of the low- and high-density wood?