Question

ForestLand Wood Products manufactures lumber and wood components. The company has two main product lines: Hardwood and Softwood. Hardwoods are used for flooring, cabinetry, paneling, doors and trimwork. Softwoods are used for wall studs, joists, planks, rafters, beams, stringers, posts, decking, subflooring and concrete forms. ForestLand also sells a by-product, wood shavings and saw dust. Shavings are purchased for farm and industrial use as well as for further processing into wood pellets and fiber board. The revenue is allocated to each product line based on the percentage of thousand board feet produced by the product line.

Your accounting firm has been retained by ForestLand for three years. You have been assigned to properly allocate support department costs. Your manager wants the allocation to be as accurate as possible and has instructed you to use the reciprocal services method. She reminds you that revenue from by-products are used to offset costs.

You begin your research and learn that there are four production departments: log yard, milling, drying, and packaging. The Hardwood line produces 300 thousand board feet of product while the Softwood produces 900 thousand board feet. The milling department direct costs, direct labor and overhead per thousand board feet for Hardwood is two times that of Softwood. You have been instructed to use the weighted average method to allocate the costs in the milling department between the two product lines. The remaining department costs are the same for both product lines, per thousand board feet.

There are two support departments: maintenance and administration. The maintenance department is responsible for maintaining all equipment and janitorial duties. Because the equipment is used more extensively for hardwoods, the department cost driver is hours worked. The administration department includes the company president and his staff. Their duties include accounting, human resources, and information technology. The cost driver for the administration department is number of employees.

In your first step, you determine the costs traced to each department and the usage of the support department cost drivers. You have created the following table:

	Maintenance	Administration	Log Yard	Milling	Drying	Packaging
Hours worked	11,000	9,720	8,100	25,920	16,200	21,060
Number of employees	6	4	4	10	12	8
Department costs	$212,960	$261,690	$375,045	$767,400	$524,095	$271,040

Y

Using the rounded amounts from the support cost allocation table (previous task), complete the following table to allocate the production department costs to each product line. Round allocated amounts to the nearest whole dollar.

	Thousand Board Feet	Weight Factor	Weighted Thous. Bd. Ft.	Weighted % of Board Feet			Final Department Costs	Cost Allocation to Product Line
Log Yard:
Hardwood					%	×	$	$
Softwood						×
Total Log Yard					%			$
Milling:
Hardwood					%	×	$	$
Softwood						×
Total Milling					%			$
Drying:
Hardwood					%	×	$	$
Softwood						×
Total Drying					%			$
Packaging:
Hardwood					%	×	$	$
Softwood						×
Total Packaging					%			$

Forest Land earns revenue of $100,000 from selling its by-products, wood shavings and saw dust. Allocate the revenue to each product line in the following table and determine the final cost per product line.

	Thousand Board Feet	Percentage of Board Feet		By-product Revenue	Portion of By- product Revenue
Hardwood			%	$100,000	$
Softwood				100,000
Total			%		$

	Cost per Product Line
	Hardwood	Softwood
Log Yard	$	$
Milling
Drying
Packaging
Subtotal	$	$
Portion of By-product revenue
Total cost per product line	$	$

Answer 1

SOLO: weight Factor weighted thaus Bd. to weighted OF 80 ft Final Dept cost. Cast Allocation of Product Line. $93761.25 $ 28128 3.75 Det 0.5 Roces - 5 $375,045 257 757 150 450 600 200 407 $ 767,400 $ 306, 960 $ 460, 440 2009 0.66 069 o 33 Thousand Bourd Feet Log yard :- Hardwoud 300 softwood 900 Total. 1200 Milling :- Hardwood 300 Softwood 900 Toral. 1200 Drying :- Hardwood 300 JOHwood 900 TotaL. 1200 Packaging Hold wood 300 softwood 900 TotaL. 1200 60% 300 500 150 .0 0.5 96 6165 0.5 $ 131,0,23.75 $ 343,071.25 $ 524,095 450 751 соб 0.00 0.5 00 00 0.5 25% 752 $ 271,040. $ 67,760 $ 203, 280 150 450 600 By -product r . Portion Thowand Board feet 0.25% 300 Hard. $100,000 325,000 $ 75,000 $100,000 sort 0.75% 900 1200 Total. Log yard Milling Drying packaging Total: COS . portion of rev. cost per product line. Hardwood softwood 937 61.25 281,283.75 306,960 460, 440 139,023.75 393 071.25 67,760 203,280 $599,505 $1,342,075 $25,000 $ 75,000