STEP C

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Waterway Sawmili Co. runs rough logs through its cutting facility for the primary purpose of producing hardwood lumber. In this process, however, not all of the wood is of high enough quality to be sold as hardwood lumber. The other joint product, lower-grade lumber, has been sold as-is to other manufacturers to make wood pallets. Last year, the following quantities and sales prices were reported. Paul, the sawmill owner, is meeting with other top managers as they consider avenues for increased profitability. They recognize that selling the lower-grade wood to other companies has certainly helped the mill's bottom line. However, they wonder if they could further process this wood themselves and make even more of a return a) Determine the gross margin levels and percentages Paul is looking at for last year's results (assume all products produced were sold). Use the sales value at split-off method to allocate joint costs. (Round proportion to 4 decimal ploces, es. 0.2516 , allocated joint costs and gross margin to 0 decimal ploces, e. 5,125 and gross margin percentage to 2 decimal places, e.s. 15.25\%) (b) The company estimates that it could process the low-grade lumber further at a cost of just $9,000 to turn this lumber into wood chips. The wood chips could be sold for $54,800. Should the company move forward with this additional processing. or should it continue to sell the low-grade lumber to other manufacturers? The company process the low-grade lumber further into wood chips. It would be financlally by \$ If it did process it further. f the outlook for low-grade lumber sales to manufacturers changes such that Waterway Sawmill will only be able to sell these ow-grade products for $1.75 per board foot at the split-off point, does that change your answer to the wood chip option in part b)? The company process the low-grade lumber further into wood chips. It would be financially by if it did process it further. (d) If the company had used the phyical quanties method instead of the sales value at splt-off method for allocating ioint cons. how would it have affected your analysis in parts (b) and (c)? (b) The company process the low grade lumber further into wood chips. It would be finandally bys procets the lowigrade lumber further into wood chips It would be finandally bys (a) The compary