Required: Based on the .infonnation given for Sonimad Sawmill, Inc., allocate the joint processing costs of $1,000,000 to each of the three product lines using the: a. Relative, sales-value-at-split-off method, b. Physical units method at split-off, c. Estimated net realizable value method Prepare an analysis for Sonimad Sawmill, Inc., to compare processing the decorative pieces further as it presently does, with selling the rough-cut product immediately at split-off. Be sure to provide all calculations. Assume Sonimad Sawmill, Inc., announced that in six months it will sell the rough-cut product at split-off due to increasing competitive pressure. Identify at least three types of likely behavior that will be demonstrated by the skilled labor in the planing and sizing process as a result of this announcement. Explain how this behavior could be improved by management. (CMA adopted)
Process Costing
Process costing is a sort of operation costing which is employed to determine the value of a product at each process or stage of producing process, applicable where goods produced from a series of continuous operations or procedure.
Job Costing
Job costing is adhesive costs of each and every job involved in the production processes. It is an accounting measure. It is a method which determines the cost of specific jobs, which are performed according to the consumer’s specifications. Job costing is possible only in businesses where the production is done as per the customer’s requirement. For example, some customers order to manufacture furniture as per their needs.
ABC Costing
Cost Accounting is a form of managerial accounting that helps the company in assessing the total variable cost so as to compute the cost of production. Cost accounting is generally used by the management so as to ensure better decision-making. In comparison to financial accounting, cost accounting has to follow a set standard ad can be used flexibly by the management as per their needs. The types of Cost Accounting include – Lean Accounting, Standard Costing, Marginal Costing and Activity Based Costing.
Sonimad Sawmill, Inc. (SSI), purchases logs from independent timber contractors and processes them into the following three types of lumber products:
- I. Studs for residential construction (e.g., walls and ceilings)
- 2. Decorative pieces (e.g., fireplace mantels and beams for cathedral ceilings)
- 3. Posts used as support braces (e.g., 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 tho logs, cutting the logs into a workable size (ranging from 8 to 16 feet in length}, and then cuttipg the individual products from the logs, depending upon the type of wood (pine, oak, walnut, or maple) and the size (diameter) of the log.
The joint process results in the following costs and output of products during a typical month:
Joint production costs:
|
Materials (rough timber logs) |
|
500,000 |
|
Debarking (labor and |
|
50,000 |
|
Sizing (labor and overhead) |
|
200,000 |
|
Product cutting (labor and overhead) |
|
250,000 |
|
Total joint costs |
|
1,000,000 |
Product yield and average sales value on a per-unit basis from the joint process are as follows:
|
Product |
Monthly Output |
Fully Processed Sales Price |
|
Studs |
75,000 |
8 |
|
Decorative pieces |
5,000 |
100 |
|
Posts |
20,000 |
20 |
The studs are sold as rough-cut lumber after emerging from the sawmill operation without further processing by SSI. Also, the posts require no further processing. The decorative pieces must be planed and further sized after emerging from the SSI sawmill. This additional
Required:
- Based on the .infonnation given for Sonimad Sawmill, Inc., allocate the joint processing costs of $1,000,000 to each of the three product lines using the: a. Relative, sales-value-at-split-off method, b. Physical units method at split-off, c. Estimated net realizable value method
-
Prepare an analysis for Sonimad Sawmill, Inc., to compare processing the decorative pieces further as it presently does, with selling the rough-cut product immediately at split-off. Be sure to provide all calculations.
-
Assume Sonimad Sawmill, Inc., announced that in six months it will sell the rough-cut product at split-off due to increasing competitive pressure. Identify at least three types of likely behavior that will be demonstrated by the skilled labor in the planing and sizing process as a result of this announcement. Explain how this behavior could be improved by management. (CMA adopted)
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