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Londonderry Lumber Inc. ( Londonderry ) purchases logs from independent timber contractors and processes the logs into three types of lumber products. These products are
Londonderry Lumber Inc. Londonderry purchases logs from independent timber contractors and processes the logs into three types of lumber products. These products are the result of a joint sawmill
process that involves removal of bark from the logs cutting the logs into a workable size, and then cutting the individual products from the logs
View the joint cost information.
View the perunit information.
The studs are sold as roughcut lumber after emerging from the sawmill operation without further processing by Londonderry. Also, the posts require no further processing beyond the splitoff point. The
decorative pieces must be planed and further sized after emerging from the sawmill. This additional processing costs $ per month and normally results in a loss of of the units entering the
process. Without this planing and sizing process, there is still an active intermediate market for the unfinished decorative pieces in which the selling price averages $ per unit.
Required
Based on the information provided for Londonderry Lumber, allocate the joint processing
costs of $ to the three products using:
a Sales value at splitoff method
b Physicalmeasure method volume in units
c NRV method
Prepare an analysis that compares processing the decorative pieces further, as is
current practice, with selling them as a roughcut product immediately at splitoff.
Assume the company announced that in six months it will sell the unfinished decorative
pieces at splitoff due to increasing competitive pressure. Identify at least three types of likely
behaviour that will be demonstrated by the skilled labour in the planingandsizing process as
a result of this announcement. Include in your discussion how this behaviour could be
influenced by management.
Joint Cost Information
The joint process results in the following costs of products for a
typical month:
Direct materials rough timber logs
Debarking labour and overhead
Sizing labour and overhead
Product cutting labour and overhead
Total joint costs
Perunit Information
Product yields and average sales values on a perunit basis from the joint process
are as follows:
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