Oregon Lumber processes timber into four products. During January, the joint costs of processing were $280,000. There was no inventory at the beginning of the month. Production and sales value information for the month were as follows:
| Sales Value at | |||
| Product | Board feet | Splitoff Point | Ending Inventory |
| 2 x 4’s | 6,000,000 | $0.30 per board foot | 500,000 bdft. |
| 2 x 6’s | 3,000,000 | 0.40 per board foot | 250,000 bdft. |
| 4 x 4’s | 2,000,000 | 0.45 per board foot | 100,000 bdft. |
| Slabs | 1,000,000 | 0.10 per board foot | 50,000 bdft. |
Required:
Determine the value of ending inventory if the sales value at splitoff method is used for product costing. Round to 3 decimal places when necessary
Answer:
| Product | Board feet | Sales Value | Percent | Joint Cost | Allocated |
| 2 x 4’s | 6,000,000 | $1,800,000 | 45.0% x | $280,000 | $126,000 |
| 2 x 6’s | 3,000,000 | 1,200,000 | 30.0 x | 280,000 | 84,000 |
| 4 x 4’s | 2,000,000 | 900,000 | 22.5 x | 280,000 | 63,000 |
| Slabs | 1,000,000 | 100,000 | 2.5 x | 280,000 | 7,000 |
| Totals | $4,000,000 | 100.0% | $280,000 |
| Product | Fraction of Prod. in Inventory | Allocated | Inventory value |
| 2 x 4’s | 500,000/6,000,000 x | $126,000 = | $10,500 |
| 2 x 6’s | 250,000/3,000,000 x | 84,000 = | 7,000 |
| 4 x 4’s | 100,000/2,000,000 x | 63,000 = | 3,150 |
| Slabs | 50,000/1,000,000 x | 7,000 = | 350 |
| Total | $21,000 |
