A sawmill purchases logs from wood from independent contractors and…

Question Answered step-by-step A sawmill purchases logs from wood from independent contractors and… A sawmill purchases logs from wood from independent contractors and transforms them intothree types of lumber products:• Posts for residential buildings (walls, ceilings)• Decorative pieces (mantelpieces, beams forcathedral ceilings)• Posts used as supports (mine supports,exterior fence brackets on properties) These products are the result of a joint process of the sawmillwhich consists of removing the bark from the logs, cutting the logs intoa workable size, then cutting the individual products from thelogs.The joint process results in the following product costsfor a typical month:Direct materials (raw wood logs) $500,000Debarking (labour and overhead) $50,000Dimensioning (labor and overhead) $200,000Product cutting (labour and indirect costs) $250,000 Product yields and average sales values per joint process unit are: Products                             Monthly production of materials                        Selling price after                                                   at the point of separation                              final transformationBuilding poles                                   75,000 units                                                     $8Decorative pieces                             5,000 units                                                     $100Support posts                                    20,000 units                                                  $20 Building poles are sold as raw timberafter leaving the sawmill without further treatment byISS. In addition, support posts do not require anyfurther processing beyond the point of separation. Thedecorative pieces need to be planed and resizedafter leaving the sawmill. This additional treatmentcosts $100,000 a month and normally results in aloss of 10% of units entering the process. Without thisplaning and dimensioning process, there are stillan active middle market for decorative pieces notfinished, in which the selling price averages $60the unit.1. Prepare an analysis for the Sonimad sawmill that compares theadditional treatment of decorative pieces, as the firmcurrently doing, with their sale as cut raw productimmediately after the point of separation. Is itcost-effective to carry out additional processing.2. Based on the information provided for the Sonimad sawmill,distribute the costs of treatment common to the three products tousing the VRN method. Accounting Business Cost Accounting ADM 3746 Share QuestionEmailCopy link Comments (0)