craik veneer _1 - Craik Veneer Case LT:9A 9th Jan, 2012 1....

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Craik Veneer Case – LT:9A 9 th Jan, 2012 1. As a controller, we choose to utilize the sales value method for allocating joint costs particularly the cost of block and part of the labour and factory overhead costs. For the materials cost we don’t see any difference since it will be divided in thousands of sq ft. For the labour and overhead costs, we separated the common cost for both faces and backs rather than treating the whole as a joint cost. Problem Definition: 2. Should Craik Veneer Company accept Groton Company's offer to of $20 per thousand feet of 1/24 -inch backs? Based on our projections using the Sales Value Method for joint cost allocation, we expect a 4% profit margin for backs at the price of $20 per thousand square feet. In order to find if the order has to be accepted or not, we have to evaluate Groton Company's offer using both the production manager's and the sales manager's methods of allocating costs. Cost and Other Information Craik Veneer is able to produce 18,000 surface feet of 1/24-inch veneer per 1,000 board feet cut which produces an average of 50% faces and 50% backs Labor and factory overhead costs together averaged $24 per thousand surface feet of veneer. Labor and factory overhead costs through clipping averaged $20.25 per 1,000 surface feet of
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This note was uploaded on 01/16/2012 for the course MBA 101 taught by Professor Wormer during the Spring '08 term at Indian Institute Of Management, Ahmedabad.

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craik veneer _1 - Craik Veneer Case LT:9A 9th Jan, 2012 1....

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