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:			Product yield and average per unit sales value
Materials (rough timber logs)	$ 500,000		Product	Monthly output	fully processed sale price
Debarking (Labor and OH)	50,000		studs	75,000	$8
Sizing (Labor and OH)	200,000		decorative pieces	5,000	100
Product Cutting (Labor and OH)	250,000		posts	20,000	20
Total Joint Costs	$ 1,000,000

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 $100,000 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.

Instructions:

Provide details for the gross profit margin percentage method for allocating joint costs.