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Please answers 4 thru 6.

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Allocation of Joint Costs: Reading Chapter 7 LO5- You can ignore the weighted average method. MAINE CORPORATION NOTE: For allocating joint costs, you certainly COULD do the standard 5-step process and develop a rate and then multiply. However, you can also do these with just percentages as is demonstrated in the book. Because of the purposes of joint cost allocation, the "rate" really has no significance on its own so, accordingly, we will be doing this the way it is shown in the text - by figuring the percent to allocate to each product and multiplying. MAINE CORPORATION purchases logs from independent imber contators and processes them into the tolowing three ypes of i mbter products Studs for residential construction (eg, walls and ceilings) Decorative pieces (e.g,freplace mantels and beams for cathedral ceilings) Posts used as support braces (eg. mine support braces and braces for exterior fences around ranch properties) In addition to the main products, the process produces a certain amount of sawdust which, while salable for commercial use, carmies a very minor total sales value with respect to the principal products. Accordingly, the company treats this sawdust as a by-product. These products are the result of a joint sawmill process that invoves removing bark from the logs, cutting the logs into a workable size (ranging from 8 to 16 feet in length), and then cutting the individual products from the logs, depending upon the type of wood (pine, oak, walnut, or maple) and the size (diameter) of the log. The joint process results in the tollowing costs and output of products during a typical month Joint production costs Materials (rough timber logs) Debarking (labor and overhead) Sizing (labor and overhead) Product cutting (labor and overhead) $ 500,000 50,000 200,000 $1,000,000 Product yieid and average sales value on a per-unit basis from the joint process are as folilows: Product Studs Decorative pieces Posts Final Sales Price After Processing $8.00 per stud $100.00 per piece $20.00 per post Out 75,000 studs 5,000 pieces 20,000 posts Also consider the folowing information about the processing of the company's products The studs are sold as rough-cut lumber after emerging from the sawmil operation without further processing . Also, the posts require no further processing . The decorative pieces can be sold rough-cut immedialely after processing at an average price of $60 per unit. Allernatively, they can be further smoothed and sized ater emerging from the sawmil. This additional processing costs $100,000 per batch and nomally resuts in a loss of 10 percent of the units entering the process. Therefore, the company has a choice as to whether or not they should sell the decorative pieces as is, or, put them through the smoothing and sizing process 1. The company wants your advice as to whether or not they should process the decorative pieces further, or, sel the rough-cut product immediately at split-off. Prepare an analysis to compare these atenatves. Be sure to provide all calculations 2. WHY is it necessary to allocate joint costs to the various products? 3. Based on the information, allocate the joint processing costs of $1,000,000 to each of the three product lines using the following methods. For each method, provide the journal entry to record the allocation of the joint cost. a. b. c. Physical Units Method at split-off Relative Sales Value at Split-Off Method Estimated Net Realizable Value Method In doing your allocations, assume that the decorative pieces are going to be finished by doing the smoothing and sizing 4. Compute the GROSS PROFIT and GROSS PROFIT PERCENTAGE on a typical month of production. 5. Discuss the advantages and disadvantages of the allocation methods above: a) is one method clearly better than the other? b) Does one method provide better "matching' for GAAP? Why? c) In what type of case would you choose to use each of the methods above? WHAT IF, in addition to the products listed above, the joint process also produced 2,000 pounds of sawdust, with a total market value of @2,000. How do you think this should be handled and WHY? What are the possibilities? 6. Allocation of Joint Costs: Reading Chapter 7 LO5- You can ignore the weighted average method. MAINE CORPORATION NOTE: For allocating joint costs, you certainly COULD do the standard 5-step process and develop a rate and then multiply. However, you can also do these with just percentages as is demonstrated in the book. Because of the purposes of joint cost allocation, the "rate" really has no significance on its own so, accordingly, we will be doing this the way it is shown in the text - by figuring the percent to allocate to each product and multiplying. MAINE CORPORATION purchases logs from independent imber contators and processes them into the tolowing three ypes of i mbter products Studs for residential construction (eg, walls and ceilings) Decorative pieces (e.g,freplace mantels and beams for cathedral ceilings) Posts used as support braces (eg. mine support braces and braces for exterior fences around ranch properties) In addition to the main products, the process produces a certain amount of sawdust which, while salable for commercial use, carmies a very minor total sales value with respect to the principal products. Accordingly, the company treats this sawdust as a by-product. These products are the result of a joint sawmill process that invoves removing bark from the logs, cutting the logs into a workable size (ranging from 8 to 16 feet in length), and then cutting the individual products from the logs, depending upon the type of wood (pine, oak, walnut, or maple) and the size (diameter) of the log. The joint process results in the tollowing costs and output of products during a typical month Joint production costs Materials (rough timber logs) Debarking (labor and overhead) Sizing (labor and overhead) Product cutting (labor and overhead) $ 500,000 50,000 200,000 $1,000,000 Product yieid and average sales value on a per-unit basis from the joint process are as folilows: Product Studs Decorative pieces Posts Final Sales Price After Processing $8.00 per stud $100.00 per piece $20.00 per post Out 75,000 studs 5,000 pieces 20,000 posts Also consider the folowing information about the processing of the company's products The studs are sold as rough-cut lumber after emerging from the sawmil operation without further processing . Also, the posts require no further processing . The decorative pieces can be sold rough-cut immedialely after processing at an average price of $60 per unit. Allernatively, they can be further smoothed and sized ater emerging from the sawmil. This additional processing costs $100,000 per batch and nomally resuts in a loss of 10 percent of the units entering the process. Therefore, the company has a choice as to whether or not they should sell the decorative pieces as is, or, put them through the smoothing and sizing process 1. The company wants your advice as to whether or not they should process the decorative pieces further, or, sel the rough-cut product immediately at split-off. Prepare an analysis to compare these atenatves. Be sure to provide all calculations 2. WHY is it necessary to allocate joint costs to the various products? 3. Based on the information, allocate the joint processing costs of $1,000,000 to each of the three product lines using the following methods. For each method, provide the journal entry to record the allocation of the joint cost. a. b. c. Physical Units Method at split-off Relative Sales Value at Split-Off Method Estimated Net Realizable Value Method In doing your allocations, assume that the decorative pieces are going to be finished by doing the smoothing and sizing 4. Compute the GROSS PROFIT and GROSS PROFIT PERCENTAGE on a typical month of production. 5. Discuss the advantages and disadvantages of the allocation methods above: a) is one method clearly better than the other? b) Does one method provide better "matching' for GAAP? Why? c) In what type of case would you choose to use each of the methods above? WHAT IF, in addition to the products listed above, the joint process also produced 2,000 pounds of sawdust, with a total market value of @2,000. How do you think this should be handled and WHY? What are the possibilities? 6