H3. 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 ashardwood 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 costsQuantities producedSales prices at split-off$468,000 (includes timber logs)109,000 board feet of hardwood lumber20,000 board feet of low-grade lumber$6.80$2.50per board foot for hardwood lumberper board foot for low-grade lumberPaul, the sawmill owner, is meeting with other top managers as they consider avenues for increased profitability. They recognize that selling the lower-grade wood to other companies has certainly helpedthe mill's bottom line. However, they wonder if they could further process this wood themselves and make even more of a return. (a)Determine the gross margin levels and percentages Paul is looking at for last year's results (assume all products produced were sold). Use the sales value at split-off method to allocate joint costs.(Round proportion to 4 decimal places, e.g. 0.2516, allocated joint costs and gross margin to O decimal places, e.g. 5,125 and gross margin percentage to 2 decimal places, e.g. 15.25%.)Allocated joint costsGross margin(b)Gross margin percentages(c)The companyShow Transcribed TextThe company(d)Hardwood$(b) The company$(c) The companyĴLow-GradeThe 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 companymove 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 be3$$process the low-grade lumber further into wood chips. It would beIf 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, doesthat change your answer to the wood chip option in part (b)?TotalsĈ✓ process the low-grade lumber further into wood chips. It would beprocess 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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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

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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