Problem 1 - Joint-Cost Allocation, Further Processing Decision (40 points) Sawmill, Inc. buys one input, logs, and refines them in a milling process. Unfinished lumber and sawdust are the immediate joint products. From each log, Sawmill is able to produce 50 feet of unfinished lumber and 30 pounds of sawdust. In June 2015, the company purchased 500 logs for $50,000 and spent another $25,000 on the milling process. The unfinished lumber can be sold immediately for $5.50 per foot and the sawdust can be sold to gardening wholesalers for $3.50 per pound. Sawmill chooses to process the unfinished lumber further into finished lumber at an additional cost of $2.50 per foot. The finished lumber can be sold for $10.50 per foot. Required: a. Allocate the joint cost to the finished lumber and sawdust using the following: 1. Sales value at splitoff method of joint cost allocation. 2. NRV method of joint cost allocation. 3. Constant gross-margin percentage NRV method of joint cost allocation b. Sawmill has decided that they can further process the sawdust into "presto logs." It takes two pounds of sawdust to produce one presto log. The further processing would incur an incremental cost of $0.50 per pound of sawdust. The presto logs can be sold for $8.00 per log. Should Sawmill, Inc. move forward with this decision? Support your answer with any necessary calculations. c. Consider that the sawdust is a byproduct instead of a joint product. It now has a selling price of $1.50 per pound. Sawmill produced 25,000 fee of finished lumber and 15,000 pounds of sawdust. Sawmill sold 15,000 feet of finished lumber and 10,000 pounds of sawdust. Show the following using the production method and the sales method of byproduct accounting. Show your work. 1. Gross margin 2. Inventory costs for finished lumber and the sawdust byproduct. Problem 2 - Process Costing (40 points) Lexington Company produces baseball bats. It has two departments that process all products. During July, the beginning work in process in the cutting department was half completed as to conversion, and complete as to direct materials. The beginning inventory included $40,000 for materials and $60,000 for conversion costs. Ending work-in-process inventory in the cutting department was 40% complete. Direct materials are added at the beginning of the process. Beginning work in process in the finishing department was 80% complete as to conversion costs. Direct materials for finishing the units are added near the end of the process. Beginning inventories included $24,000 for transferred-in costs and $28,000 for conversion costs. Ending inventory was 30% complete. Additional information about the two departments follows: Finishing 24,000 Beginning work-in-process units Units started this period Units transferred out this period Ending work-in-process units Cutting 20,000 60,000 64,000 68,000 20,000 Material costs added Conversion costs added Transferred-out cost $48.000 28.000 128,000 $34,000 68,500 Required: a. Prepare a production cost worksheet, using FIFO for the finishing department. b. Prepare a production cost worksheet, using Weighted-Average Method for the finishing department. Problem 3 - Spoilage, Rework, and Scrap (20 Points) The West Corporation has an extensive job-costing facility that uses a variety of metals. Job #10 uses a particular metal alloy that is not used for any other job. Assume that the job generates normal scrap with a total sales value of $480. Prepare the journal entries for the recognition of scrap, assuming the following. Consider each requirement independently. 1. The value of the scrap is immaterial and scrap is recognized at the time of sale. 2. The value of the scrap is material, is related to a specific job, and is recognized at the time of sale. 3. The scrap generated is common to all jobs, material in amount, and sold quick after it is produced. 4. Suppose the scrap generated in requirement 3 is returned to the storeroom for future use. A month later, the scrap is reused as direct material on a subsequent job. Problem 1 - Joint-Cost Allocation, Further Processing Decision (40 points) Sawmill, Inc. buys one input, logs, and refines them in a milling process. Unfinished lumber and sawdust are the immediate joint products. From each log, Sawmill is able to produce 50 feet of unfinished lumber and 30 pounds of sawdust. In June 2015, the company purchased 500 logs for $50,000 and spent another $25,000 on the milling process. The unfinished lumber can be sold immediately for $5.50 per foot and the sawdust can be sold to gardening wholesalers for $3.50 per pound. Sawmill chooses to process the unfinished lumber further into finished lumber at an additional cost of $2.50 per foot. The finished lumber can be sold for $10.50 per foot. Required: a. Allocate the joint cost to the finished lumber and sawdust using the following: 1. Sales value at splitoff method of joint cost allocation. 2. NRV method of joint cost allocation. 3. Constant gross-margin percentage NRV method of joint cost allocation b. Sawmill has decided that they can further process the sawdust into "presto logs." It takes two pounds of sawdust to produce one presto log. The further processing would incur an incremental cost of $0.50 per pound of sawdust. The presto logs can be sold for $8.00 per log. Should Sawmill, Inc. move forward with this decision? Support your answer with any necessary calculations. c. Consider that the sawdust is a byproduct instead of a joint product. It now has a selling price of $1.50 per pound. Sawmill produced 25,000 fee of finished lumber and 15,000 pounds of sawdust. Sawmill sold 15,000 feet of finished lumber and 10,000 pounds of sawdust. Show the following using the production method and the sales method of byproduct accounting. Show your work. 1. Gross margin 2. Inventory costs for finished lumber and the sawdust byproduct. Problem 2 - Process Costing (40 points) Lexington Company produces baseball bats. It has two departments that process all products. During July, the beginning work in process in the cutting department was half completed as to conversion, and complete as to direct materials. The beginning inventory included $40,000 for materials and $60,000 for conversion costs. Ending work-in-process inventory in the cutting department was 40% complete. Direct materials are added at the beginning of the process. Beginning work in process in the finishing department was 80% complete as to conversion costs. Direct materials for finishing the units are added near the end of the process. Beginning inventories included $24,000 for transferred-in costs and $28,000 for conversion costs. Ending inventory was 30% complete. Additional information about the two departments follows: Finishing 24,000 Beginning work-in-process units Units started this period Units transferred out this period Ending work-in-process units Cutting 20,000 60,000 64,000 68,000 20,000 Material costs added Conversion costs added Transferred-out cost $48.000 28.000 128,000 $34,000 68,500 Required: a. Prepare a production cost worksheet, using FIFO for the finishing department. b. Prepare a production cost worksheet, using Weighted-Average Method for the finishing department. Problem 3 - Spoilage, Rework, and Scrap (20 Points) The West Corporation has an extensive job-costing facility that uses a variety of metals. Job #10 uses a particular metal alloy that is not used for any other job. Assume that the job generates normal scrap with a total sales value of $480. Prepare the journal entries for the recognition of scrap, assuming the following. Consider each requirement independently. 1. The value of the scrap is immaterial and scrap is recognized at the time of sale. 2. The value of the scrap is material, is related to a specific job, and is recognized at the time of sale. 3. The scrap generated is common to all jobs, material in amount, and sold quick after it is produced. 4. Suppose the scrap generated in requirement 3 is returned to the storeroom for future use. A month later, the scrap is reused as direct material on a subsequent job