Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

Physical Units Method, Relative Sales-Value-at-Split-off Method, Net Realizable Value Method, Decision Making Sonimad Sawmill, Inc. (SSI), purchases logs from independent timber contractors and processes them

Physical Units Method, Relative Sales-Value-at-Split-off Method, Net Realizable Value Method, Decision Making

Sonimad Sawmill, Inc. (SSI), purchases logs from independent timber contractors and processes them into the following three types of lumber products:

  1. Studs for residential construction (e.g., walls and ceilings)
  2. Decorative pieces (e.g., fireplace mantels and beams for cathedral ceilings)
  3. Posts used as support braces (e.g., mine support braces and braces for exterior fences around ranch properties)

These products are the result of a joint sawmill process that involves 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 following costs and output of products during a typical month:

Joint production costs:
Materials (rough timber logs) $500,000
Debarking (labor and overhead) 50,000
Sizing (labor and overhead) 200,000
Product cutting (labor and overhead) 240,000
Total joint costs $990,000

Product yield and average sales value on a per-unit basis from the joint process are as follows:

Product Monthly Output Fully Processed Sales Price
Studs 70,000 $8
Decorative pieces 5,000 100
Posts 25,000 20

The studs are sold as rough-cut lumber after emerging from the sawmill operation without further processing by SSI. Also, the posts require no further processing. The decorative pieces must be planed and further sized after emerging from the SSI sawmill. This additional processing costs SSI $80,000 per month and normally results in a loss of 10 percent of the units entering the process. Without this planing and sizing process, there is still an active intermediate market for the unfinished decorative pieces where the sales price averages $60 per unit.image text in transcribed

Required: 1. Based on the information given for Sonimad Sawmill, Inc., allocate the joint processing costs of $990,000 to each of the three product lines using the: a. Relative sales-value-at-split-off method. When required, round decimal values to four places before converting to a percentage. For example, .88349 would be rounded to.8835 and entered as "88.35" percent. Relative Sales Value Monthly Unit Output Allocated Joint Sales Price per Unit Percent of at Split-Off Sales Costs Studs 70,000 $ 41.1765 X % 8 560,000 230,608 x Decorative pieces 5,000 60 300,000 22.0588 X % 66,180 X Posts 25,000 20 500,000 36.7647 X % 183,850 X Total $ 100 % 1,360,000 480,638 X (Note: Difference due to rounding.) .) b. Physical units method at split-off Allocated Joint Costs Units Percent Joint Cost 70 $ $ Studs 70,000 % 480,638 X 336,447 x 5 Decorative pieces 5,000 480,638 x 24,032 X % 25 Posts 25,000 480,638 x 120,160 x % Total 100,000 480,639 x C. Estimated net realizable value method. When required, round decimal values to four places before converting to a percentage. For example, .88349 would be rounded to.8835 and entered as "88.35" percent. Fully Processed Monthly Sales Price Net Realizable Percent of Estimated Allocated Unit Output per Unit Value Value Joint Costs $ $ $ Studs 70,000 39.7163 X 8 560,000 222,411 X Decorative pieces 4,500 100 450,000 X 24.8227 X % 86,879 X Posts 25,000 20 500,000 35.4640 X % 177,320 x $ Total $ 1,510,000 X 100 % 486,610 X (Note: Difference due to rounding.)

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

CIA Exam Practice Questions Certified Internal Auditor

Authors: The Internal Audit Foundation

1st Edition

163454045X, 978-1634540452

More Books

Students also viewed these Accounting questions

Question

What is a cusp? Give examples.

Answered: 1 week ago

Question

8. Explain the difference between translation and interpretation.

Answered: 1 week ago

Question

10. Discuss the complexities of language policies.

Answered: 1 week ago

Question

1. Understand how verbal and nonverbal communication differ.

Answered: 1 week ago