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CMA Part 1 Essay Practice Questions and Answer-Sonimad Sawmi

- 时间: 2017-08-24 13:49 - 作者: Ethan - 来源: 未知 -

Question – Sonimad Sawmill
Sonimad Sawmill Inc. (SSI) purchases logs from independent timber contractors and processes the logs into the following three types of lumber products.
  • Studs for residential building (e.g., walls, ceilings).
  • Decorative pieces (e.g., fireplace mantels, beams for cathedral ceilings).
  • Posts used as support braces (e.g., mine support braces, braces for exterior fences around 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, 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 for 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)                      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 processing costs SSI $100,000 per month and normally results in a loss of 10% of the units entering the process.  Without this planning and sizing process, there is still an active intermediate market for the unfinished decorative pieces where the sales price averages $60 per unit.
1.      Based on the information 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 method at split-off.
b.      physical output (volume) method at split-off.
c.       estimated net realizable value method.
2.      Prepare an analysis for Sonimad Sawmill Inc. to compare processing the decorative pieces further as they presently do, with selling the rough-cut product immediately at split-off and recommend which action the company should take.  Be sure to provide all calculations.

Answer:  Question  – Sonimad Sawmill
1.      a.   Relative sales value method at split-off
      Product       Monthly Output Sales Price Split-off Value % of Sales Allocated Costs
      Studs                       75,000        $    8 $    600,000       46.15%    $    461,539
      Decorative pieces      5,000                60           300,000       23.08%              230,769
      Posts                        20,000                20      400,000     30.77%         307,692
     Totals                                                             $1,300,000     100.00%         $1,000,000
b.   Physical output (volume) method at split-off
      Product       Monthly Output % of Output Allocated Costs
      Studs                      75,000            75.00%    $    750,000
      Decorative pieces     5,000              5.00%                50,000
      Posts                     20,000          20.00%         200.000
      Totals                   100,000          100.00%         $1,000,000                                   
c.   Estimated net realizable value method
      Product       Monthly Output Sales Price Net Value  % of Net Value   Allocated Costs
      Studs                       75,000     $    8 $    600,000             44.44%      $    444,445
      Decorative pieces     4,5001           100          350,0002             25.93%                259,259
      Posts                        20,000             20      400,000           29.63%           296,296
      Totals                                                        $1,350,000           100.00%           $1,000,000
     (1) 5,000 monthly units of output – 10% normal spoilage = 4,500 good units
     (2) 4,500 good units x $100 = $450,000 – further processing costs of $100,000 = $350,000
2.      Presented below is an analysis for Sonimad Sawmill comparing the processing of decorative pieces further versus selling the rough-cut product immediately at split-off..  Based on this analysis, it is recommended that Sonimad further process the decorative pieces as this action results in an additional contribution of $50,000. 
                                                                                             Units                Dollars
            Monthly unit output                                                 5,000
            Less normal further processing shrinkage                500
                Units available for sale                                     4,500
            Final sales value (4,500 units @$100 each)                                     $450,000
            Less sales value at split-off                                                              300,000
                Differential revenue                                                                   150,000
            Less further processing costs                                                           100,000
          Additional contribution from further processing       $  50,000



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