ACTG2020_Week5 2014 Ch12CMD (1)

It will always be profitable to continue processing a

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Unformatted text preview: xceeds the incremental processing costs incurred after the split-off point. LO 2 Sell or Process Further: An Example Sawmill, Inc. cuts logs from which unfinished lumber and sawdust are the immediate joint products. Unfinished lumber is sold “as is” or processed further into finished lumber. Sawdust can also be sold “as is” to gardening wholesalers or processed further into “presto-logs.” LO 2 Sell or Process Further Data about Sawmill’s joint products includes: S ales value at the split-off point S ales value after further processing Allocated joint product costs Cost of further processing Per Log Lumber Sawdust $ 140 $ 40 270 176 50 50 24 20 LO 2 Sell or Process Further Analysis of Sell or Process Further Per Log Lumber Sales value after further processing Sales value at the split-off point Incremental revenue Cost of further processing Profit (loss) from further processing Sawdust $ $ $ 270 140 130 50 80 $ 50 40 10 20 (10) Should we process the lumber further and sell the sawdust “as is?” LO 2 Key Terms and Concepts When a limited resource of some type restricts the company’s ability to satisfy demand, the company...
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