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Blossom Sawmill 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. Joint process costs Quantities produced Sales prices at split-off $468,000 (includes timber logs) 109,000 board feet of hardwood lumber 20,000 board feet of low-grade lumber $6.80 per board foot for hardwood lumber $2.50 per board foot for low-grade lumber

Blossom Sawmill 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. Joint process costs Quantities produced Sales prices at split-off $468,000 (includes timber logs) 109,000 board feet of hardwood lumber 20,000 board feet of low-grade lumber $6.80 per board foot for hardwood lumber $2.50 per board foot for low-grade lumber

FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Blossom Sawmill 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. Joint process costs Quantities produced Sales prices at split-off $468,000 (includes timber logs) 109,000 board feet of hardwood lumber 20,000 board feet of low-grade lumber $6.80 $2.50 per board foot for hardwood lumber per board foot for low-grade lumber 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.
Transcribed Image Text:Blossom Sawmill 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. Joint process costs Quantities produced Sales prices at split-off $468,000 (includes timber logs) 109,000 board feet of hardwood lumber 20,000 board feet of low-grade lumber $6.80 $2.50 per board foot for hardwood lumber per board foot for low-grade lumber 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 places, e.g. 0.2516, allocated joint costs and gross margin to O decimal places, e.g. 5,125 and gross margin percentage to 2 decimal places, e.g. 15.25%.) Allocated joint costs Gross margin (b) Gross margin percentages (c) The company Show Transcribed Text The company (d) Hardwood $ (b) The company $ (c) The company Ĵ Low-Grade 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 $53,700. Should the company move forward with this additional processing, or should it continue to sell the low-grade lumber to other manufacturers? % process the low-grade lumber further into wood chips. It would be 3 $ $ process the low-grade lumber further into wood chips. It would be If the outlook for low-grade lumber sales to manufacturers changes such that Blossom Sawmill will only be able to sell these low-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)? Totals Ĉ ✓ process the low-grade lumber further into wood chips. It would be process the low-grade lumber further into wood chips. It would be ✓financially by $ % financially by $ If the company had used the physical quantities method instead of the sales value at split-off method for allocating joint costs, how would it have affected your analysis in parts (b) and (c)? if it did process it further. financially by $ ✓financially by $ if it did process it further. if it did process it further. if it did process it further.
Transcribed Image Text:(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 places, e.g. 0.2516, allocated joint costs and gross margin to O decimal places, e.g. 5,125 and gross margin percentage to 2 decimal places, e.g. 15.25%.) Allocated joint costs Gross margin (b) Gross margin percentages (c) The company Show Transcribed Text The company (d) Hardwood $ (b) The company $ (c) The company Ĵ Low-Grade 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 $53,700. Should the company move forward with this additional processing, or should it continue to sell the low-grade lumber to other manufacturers? % process the low-grade lumber further into wood chips. It would be 3 $ $ process the low-grade lumber further into wood chips. It would be If the outlook for low-grade lumber sales to manufacturers changes such that Blossom Sawmill will only be able to sell these low-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)? Totals Ĉ ✓ process the low-grade lumber further into wood chips. It would be process the low-grade lumber further into wood chips. It would be ✓financially by $ % financially by $ If the company had used the physical quantities method instead of the sales value at split-off method for allocating joint costs, how would it have affected your analysis in parts (b) and (c)? if it did process it further. financially by $ ✓financially by $ if it did process it further. if it did process it further. if it did process it further.
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