Should forrest process each of the products

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Reference no: EM133529732

Case Study: Forrest Products buys cut trees and processes them into wood products. Each batch of trees that Forrest purchases for $500 can be converted for an additional $400 into 2,000 ft of rough sawn lumber and 200 bundles of bulk firewood. Rough sawn lumber can be sold at splitoff for $0.90 per foot, and the bulk firewood can be sold for $0.50 per bundle. Forrest can process the 2,000 ft of rough sawn lumber into 1,720 ft of dried, treated lumber for an additional cost of $800, and the firewood can be split into smaller pieces and bundled into 180 bundles for an additional cost of $200. Dried, treated lumber can be sold for $1.50 per foot. The 180 bundles of firewood can be sold for $2.50. per bundle.

Question: Allocate the joint cost to the dried, treated lumber and the processed firewood bundles using the following:

Sales value at splitoff method
NRV method
Should Forrest process each of the products further or sell at spittoff? What effect does the allocation method have on this decision?

Reference no: EM133529732

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