Question

eBook Physical Units Method, Relative Sales-Value-at -Split-off Method, Net Realizable Value Method, Decision Making Sonimad Sawmill, Inc. (SSI), purchases lags from independent timber contractors and processes them into the following thr 2. Decorative pieces (e.g., fireplace mantels and beams for cathedral ceilings) 3. Posts used as support braces (e.a., 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 c (diameter) of the log cutting the individual products from the logs, depending upon the type of wood (pine, oak, walnut, or maple) and the size The joint process results in the following costs and output of products during a typical month 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 Total joint costs Product yield and average sales value on a per-ünit basis from the joint process are as follows: Monthly Fully Processed , Output Sales Price Product 10:35 PM

Answer 1

			Sonimad Sawmill
1 a)			Sales Value at split off method
	Total cost allocated	$                      10,00,000.00
		(A)	(B)	(C )=(A)*(B)	*(D )	Total allocated cost($1000000)*(D)
		Monthly Unit output	Selling Price per unit	Sale value of total production at split off point	Weight	Total cost alloacated
	Studs	75000	$                                 8.00	$                                 6,00,000.00	46.15%	$                               4,61,538
	Decorative Pieces	5000	$                               60.00	$                                 3,00,000.00	23.08%	$                               2,30,769
	Posts	20000	$                               20.00	$                                 4,00,000.00	30.77%	$                               3,07,692
	Total			$                               13,00,000.00	100.00%	$                            10,00,000
*	Weight of allocation
	Studs	($600000/$1300000)*100
	Decorative Pieces	($300000/$1300000)*100
	Posts	($400000/$1300000)*100
1 b)		Physical unit method at split off
		(A)	**(B)	Total allocated cost($1000000)*(B)
		Monthly unit output	Weight	Total cost allocated
	Studs	75000	0.75	$                                 7,50,000.00
	Decorative Pieces	5000	0.05	$                                     50,000.00
	Posts	20000	0.2	$                                 2,00,000.00
	Total	100000	1	$                               10,00,000.00
**	Weight of allocation
	Studs	($75000/$100000)*100
	Decorative Pieces	($5000/$100000)*100
	Posts	($20000/$100000)*100
1 c)		Net Realizable value method
		(A)	(B)	(C )=(A)*(B)	(D)	($1000000*(D))
		Monthly unit output	Fully Processed selling price per unit	Net Realizable value at split off	***Weight	Total allocated cost
	Studs	75000	8	600000	45%	$                               4,51,128
*****	Decorative Pieces	4500	100	330000	25%	$                               2,48,120
	Posts	20000	20	400000	30%	$                               3,00,752
	Total			1330000	100%	$                            10,00,000
	Decorative Pieces
*****	Output
	5000-10% normal loss=	4500
	Selling Price=	(4500*100-$120000)
	Weight for allocation
***	Studs	($600000/$1330000)*100
	Decorative Pieces	($330000/$1330000)*100
	Posts	($400000/$1330000)*100
		Sonimad Sawmill
		Analysis Report
	Montly Output	5000
	Less: Normal loss	500
	Total decorative units available for sale	4500
	Sales Value(4500*$100)=(A)		$                   4,50,000.00
	Sales value at split off point(5000*$60)=(B)		$                   3,00,000.00
	Incremental Revenue($450000-$300000)(C )=(A)-(B)		$                   1,50,000.00
	Incremental cost=(D)		$                   1,20,000.00
	Incremental contribution after further processing(C )-(D)		$                      30,000.00