....purchases logs from independent timber contractors and processes them into the following three types of lumber products:

• Studs for residential construction (e.g., walls and ceilings)
• Decorative pieces (e.g., fireplace mantels and beams for cathedral ceilings)
• Posts used as support braces (e.g., 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, carries 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 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:

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

Also consider the following information about the processing of the companys products:

• The studs are sold as rough-cut lumber after emerging from the sawmill operation without further processing.
• Also, the posts require no further processing.
• The decorative pieces can be sold rough-cut immediately after processing at an average price of $60 per unit. Alternatively, they can be further smoothed and sized after emerging from the sawmill. This additional processing costs $100,000 per batchand normally results 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.

Required:

1. Compute the overall GROSS PROFIT and GROSS PROFIT PERCENTAGE on a typical month of production assuming that all products are processed further.

Joint production costs: Materials (rough timber logs) Debarking (labor and overhead) Sizing (labor and overhead) Product cutting (labor and overhead) $ 500,000 50,000 200,000 250,000 $ 1,000,000 Product Studs Decorative pieces Posts Monthly Output 75,000 studs 5,000 pieces 20,000 posts Final Sales Price After Processing $8.00 per stud $100.00 per piece $20.00 per post