Sonimad Sawmill, Inc. (SSI), purchases logs from independent timber contractors and processes them into the following three types of lumber products: Studs for residential construction (e.g., walls and ceilings) Decorative pieces (e.g., fireplace mantels and beams for cathedral ceilings) 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 the logs, cutting the logs into a workable size (ranging from 8 to 16 feet in length), and then cutting 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 overhead) 50,000 Sizing (labor and overhead) 200,000 Product cutting (labor and overhead) 240,000 Total joint costs $990,000 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 processing costs SSI $100,000 per month and normally results in a loss of 10 percent of the units entering the process. Without this planing and sizing process, there is still an active intermediate market for the unfinished decorative pieces where the sales price averages $60 per unit. Required: 2. 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. Sonimad Sawmill, Inc. Analysis Report fill in the blank Monthly unit output fill in the blank fill in the blank fill in the blank fill in the blank fill in the blank Final sales value $fill in the blank fill in the blank fill in the blank Differential revenue $fill in the blank fill in the blank fill in the blank Additional contribution from further processing $fill in the blank

Sonimad Sawmill, Inc. (SSI), purchases logs from independent timber contractors and processes them into the following three types of lumber products: Studs for residential construction (e.g., walls and ceilings) Decorative pieces (e.g., fireplace mantels and beams for cathedral ceilings) 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 the logs, cutting the logs into a workable size (ranging from 8 to 16 feet in length), and then cutting 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 overhead) 50,000 Sizing (labor and overhead) 200,000 Product cutting (labor and overhead) 240,000 Total joint costs $990,000 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 processing costs SSI $100,000 per month and normally results in a loss of 10 percent of the units entering the process. Without this planing and sizing process, there is still an active intermediate market for the unfinished decorative pieces where the sales price averages $60 per unit. Required: 2. 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. Sonimad Sawmill, Inc. Analysis Report fill in the blank Monthly unit output fill in the blank fill in the blank fill in the blank fill in the blank fill in the blank Final sales value $fill in the blank fill in the blank fill in the blank Differential revenue $fill in the blank fill in the blank fill in the blank Additional contribution from further processing $fill in the blank

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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Sonimad Sawmill, Inc. (SSI), purchases logs from independent timber contractors and processes them into the following three types of lumber products:

Studs for residential construction (e.g., walls and ceilings)
Decorative pieces (e.g., fireplace mantels and beams for cathedral ceilings)
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 the logs, cutting the logs into a workable size (ranging from 8 to 16 feet in length), and then cutting 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 overhead)	50,000
Sizing (labor and overhead)	200,000
Product cutting (labor and overhead)	240,000
Total joint costs	$990,000

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 processing costs SSI $100,000 per month and normally results in a loss of 10 percent of the units entering the process. Without this planing and sizing process, there is still an active intermediate market for the unfinished decorative pieces where the sales price averages $60 per unit.

Required:

2. 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.

Sonimad Sawmill, Inc.
Analysis Report
fill in the blank
Monthly unit output	fill in the blank
fill in the blank	fill in the blank
fill in the blank	fill in the blank
Final sales value	$fill in the blank
fill in the blank	fill in the blank
Differential revenue	$fill in the blank
fill in the blank	fill in the blank
Additional contribution from further processing	$fill in the blank

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