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Problem 1 Joint-Cost Allocation, Further Processing Decision (40 points) Sawmill, Inc. buys one input, logs, and refines them in a milling process. Unfinished lumber and sawdust are the immediate joint products. From each log, Sawmill is able to produce 50 feet of unfinished lumber and 30 pounds of sawdust. In June 2015, the company purchased 500 logs for $50,000 and spent another $25,000 on the milling process. The unfinished lumber can be sold immediately for $5.50 per foot and the sawdust can be sold to gardening wholesalers for $3.50 per pound. Sawmill chooses to process the unfinished lumber further into finished lumber at an additional cost of $2.50 per foot. The finished lumber can be sold for $10.50 per foot. Required: Allocate the joint cost to the finished lumber and sawdust using the following: 1. Sales value at splitoff method of joint cost allocation. 2. NRV method of joint cost allocation. 3. Constant gross-margin percentage NRV method of joint cost allocation a. b. Sawmill has decided that they can further process the sawdust into "presto logs." It takes two pounds of sawdust to produce one presto log. The further processing would incur an incremental cost of $0.50 per pound of sawdust. The presto logs can be sold for $8.00 per log. Should Sawmill, Inc. move forward with this decision? Support your answer with any necessary calculations. c. Consider that the sawdust is a byproduct instead of a joint product. It now has a selling price of $1.50 per pound. Sawmill produced 25,000 fee of finished lumber and 15,000 pounds of sawdust. Sawmill sold 15,000 feet of finished lumber and 10,000 pounds of sawdust. Show the following using the production method and the sales method of byproduct accounting. Show your work. 1. Gross margin 2. Inventory costs for finished lumber and the sawdust byproduct

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