Sonimad Sawmill, Inc. (SSI), 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)

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)	260,000
Total joint costs	$1,010,000

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	75,000	$8
Decorative pieces	5,000	100
Posts	20,000	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 $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.

Required:

Question Content Area

1. Based on the information given for Sonimad Sawmill, Inc., allocate the joint processing costs of $1,010,000 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.

	Monthly Unit Output	Sales Price per Unit	Relative Sales Value at Split-Off	Percent of Sales		Allocated Joint Costs
Studs	fill in the blank e04e50028057020_1	$fill in the blank e04e50028057020_2	$fill in the blank e04e50028057020_3	fill in the blank e04e50028057020_4	%	$fill in the blank e04e50028057020_5
Decorative pieces	fill in the blank e04e50028057020_6	fill in the blank e04e50028057020_7	fill in the blank e04e50028057020_8	fill in the blank e04e50028057020_9	%	fill in the blank e04e50028057020_10
Posts	fill in the blank e04e50028057020_11	fill in the blank e04e50028057020_12	fill in the blank e04e50028057020_13	fill in the blank e04e50028057020_14	%	fill in the blank e04e50028057020_15
Total			$fill in the blank e04e50028057020_16	fill in the blank e04e50028057020_17	%	$fill in the blank e04e50028057020_18

(Note: Difference due to rounding.)

b. Physical units method at split-off.

	Units	Percent	x	Joint Cost	=	Allocated Joint Costs
Studs	fill in the blank e04e50028057020_19	fill in the blank e04e50028057020_20%		$fill in the blank e04e50028057020_21		$fill in the blank e04e50028057020_22
Decorative pieces	fill in the blank e04e50028057020_23	fill in the blank e04e50028057020_24%		fill in the blank e04e50028057020_25		fill in the blank e04e50028057020_26
Posts	fill in the blank e04e50028057020_27	fill in the blank e04e50028057020_28%		fill in the blank e04e50028057020_29		fill in the blank e04e50028057020_30
Total	fill in the blank e04e50028057020_31					$fill in the blank e04e50028057020_32

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 Unit Output	Sales Price per Unit	Net Realizable Value	Percent of Value		Estimated Allocated Joint Costs
Studs	fill in the blank e04e50028057020_33	$fill in the blank e04e50028057020_34	$fill in the blank e04e50028057020_35	fill in the blank e04e50028057020_36	%	$fill in the blank e04e50028057020_37
Decorative pieces	fill in the blank e04e50028057020_38	fill in the blank e04e50028057020_39	fill in the blank e04e50028057020_40	fill in the blank e04e50028057020_41	%	fill in the blank e04e50028057020_42
Posts	fill in the blank e04e50028057020_43	fill in the blank e04e50028057020_44	fill in the blank e04e50028057020_45	fill in the blank e04e50028057020_46	%	fill in the blank e04e50028057020_47
Total			$fill in the blank e04e50028057020_48	fill in the blank e04e50028057020_49	%	$fill in the blank e04e50028057020_50

(Note: Difference due to rounding.)

Question Content Area

2. Prepare an analysis for Sonimad Sawmill, Inc., to compare processing the decorative pieces further as it presently does, with selling the rough-cut product immediately at split-off.

Sonimad Sawmill, Inc. Analysis Report blank

Monthly unit output	fill in the blank e2258bf89ff2fe3_1
Additional contribution from further processingDifferential revenueFinal sales valueLess: Further processing costsLess: Normal further processing shrinkageLess: Sales value at split-offMonthly unit outputAdditional contribution from further processing	Additional contribution from further processing
Additional contribution from further processingDifferential revenueFinal sales valueLess: Further processing costsLess: Sales value at split-offMonthly unit outputUnits available for saleDifferential revenue	Differential revenue
Final sales value	$fill in the blank e2258bf89ff2fe3_6
Additional contribution from further processingDifferential revenueFinal sales valueLess: Normal further processing shrinkageLess: Sales value at split-offMonthly unit outputUnits available for sale	- Select -
Differential revenue	$fill in the blank e2258bf89ff2fe3_9
Additional contribution from further processingDifferential revenueFinal sales valueLess: Further processing costsLess: Normal further processing shrinkageMonthly unit outputUnits available for sale	- Select -
Additional contribution from further processing	$fill in the blank e2258bf89ff2fe3_12