Horngren's Cost Accounting: A Managerial Emphasis (16th Edition)
Horngren's Cost Accounting: A Managerial Emphasis (16th Edition)
16th Edition
ISBN: 9780134475585
Author: Srikant M. Datar, Madhav V. Rajan
Publisher: PEARSON
bartleby

Videos

Textbook Question
Book Icon
Chapter 16, Problem 16.35P

Joint-cost allocation, process further or sell. (CMA, adapted) Liverpool Sawmill, Inc. (LSI) purchases logs from independent timber contractors and processes the logs into three types of lumber products:

  • Studs for residential buildings (walls, ceilings)
  • Decorative pieces (fireplace mantels, beams for cathedral ceilings)
  • Posts used as support braces (mine support braces, braces for exterior fences on ranch properties)

These products are the result of a joint sawmill process that involves removal of 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.

The joint process results in the following costs of products for a typical month:

Direct materials (rough timber logs) $ 480,000
Debarking (labor and overhead) 50,000
Sizing (labor and overhead) 220,000
Product cutting (labor and overhead) 260,000
Total joint costs $1,010,000

Product yields and average sales values on a per-unit basis from the joint process are as follows:

Product Monthly Output of Materials at Splitoff Point Fully Processed Selling Price
Studs 78,000 units $ 5
Decorative pieces 4,000 units 85
Posts 28,000 units 26

The studs are sold as rough-cut lumber after emerging from the sawmill operation without further processing by LSI. Also, the posts require no further processing beyond the splitoff point. The decorative pieces must be planed and further sized after emerging from the sawmill. This additional processing costs $90,000 per month and normally results in a loss of 10% of the units entering the process. Without this planing and sizing process, there is still an active intermediate market for the unfinished decorative pieces in which the selling price averages $55 per unit.

  1. 1. Based on the information given for Liverpool Sawmill, allocate the joint processing costs of $1,010,000 to the three products using:

  Required

  1. a. Sales value at splitoff method
  2. b. Physical-measure method (volume in units)
  3. c. NRV method
  4. 2. Prepare an analysis for Liverpool Sawmill that compares processing the decorative pieces further, as it currently does, with selling them as a rough-cut product immediately at splitoff.
  5. 3. Assume Liverpool Sawmill announced that in six months it will sell the unfinished decorative pieces at splitoff 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. Include in your discussion how this behavior could be influenced by management.
Blurred answer
Students have asked these similar questions
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…
Sonimad Sawmill, Inc. (SSI), purchases logs from independent timber contractors and processesthem into the following three types of lumber products:1. 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 fencesaround ranch properties)These products are the result of a joint sawmill process that involves removing bark from thelogs, cutting the logs into a workable size (ranging from 8 to 16 feet in length), and then cuttingthe individual products from the logs, depending upon the type of wood (pine, oak, walnut, ormaple) and the size (diameter) of the log. The studs are sold as rough-cut lumber after emerging from the sawmill operation without fur-ther 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…
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 overhead)   50,000 Sizing (labor and overhead)…

Chapter 16 Solutions

Horngren's Cost Accounting: A Managerial Emphasis (16th Edition)

Ch. 16 - Why is the constant gross-margin percentage NRV...Ch. 16 - Managers must decide whether a product should be...Ch. 16 - Prob. 16.13QCh. 16 - Describe two major methods to account for...Ch. 16 - Why might managers seeking a monthly bonus based...Ch. 16 - Prob. 16.16MCQCh. 16 - Joint costs of 8,000 are incurred to process X and...Ch. 16 - Houston Corporation has two products, Astros and...Ch. 16 - Dallas Company produces joint products, TomL and...Ch. 16 - Earls Hurricane Lamp Oil Company produces both A-1...Ch. 16 - Joint-cost allocation, insurance settlement....Ch. 16 - Joint products and byproducts (continuation of...Ch. 16 - Net realizable value method. Sweeney Company is...Ch. 16 - Alternative joint-cost-allocation methods,...Ch. 16 - Alternative methods of joint-cost allocation,...Ch. 16 - Prob. 16.26ECh. 16 - Joint-cost allocation, sales value, physical...Ch. 16 - Joint-cost allocation: Sell immediately or process...Ch. 16 - Accounting for a main product and a byproduct....Ch. 16 - Joint costs and decision making. Jack Bibby is a...Ch. 16 - Joint costs and byproducts. (W. Crum adapted)...Ch. 16 - Methods of joint-cost allocation, ending...Ch. 16 - Alternative methods of joint-cost allocation,...Ch. 16 - Comparison of alternative joint-cost-allocation...Ch. 16 - Joint-cost allocation, process further or sell....Ch. 16 - Joint-cost allocation. SW Flour Company buys 1...Ch. 16 - Further processing decision (continuation of...Ch. 16 - Joint-cost allocation with a byproduct. The...Ch. 16 - Byproduct-costing journal entries (continuation of...Ch. 16 - Joint-cost allocation, process further or sell....Ch. 16 - Prob. 16.41PCh. 16 - Prob. 16.42PCh. 16 - Methods of joint-cost allocation, comprehensive....
Knowledge Booster
Background pattern image
Accounting
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, accounting and related others by exploring similar questions and additional content below.
Similar questions
SEE MORE QUESTIONS
Recommended textbooks for you
Text book image
Cornerstones of Cost Management (Cornerstones Ser...
Accounting
ISBN:9781305970663
Author:Don R. Hansen, Maryanne M. Mowen
Publisher:Cengage Learning
Text book image
Managerial Accounting
Accounting
ISBN:9781337912020
Author:Carl Warren, Ph.d. Cma William B. Tayler
Publisher:South-Western College Pub
Text book image
Managerial Accounting: The Cornerstone of Busines...
Accounting
ISBN:9781337115773
Author:Maryanne M. Mowen, Don R. Hansen, Dan L. Heitger
Publisher:Cengage Learning
Text book image
Financial And Managerial Accounting
Accounting
ISBN:9781337902663
Author:WARREN, Carl S.
Publisher:Cengage Learning,
Financial ratio analysis; Author: The Finance Storyteller;https://www.youtube.com/watch?v=MTq7HuvoGck;License: Standard Youtube License