P 8-28: Columbine Granite Columbine Granite produces a number of different grani
ID: 2537857 • Letter: P
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P 8-28: Columbine Granite Columbine Granite produces a number of different granite products from its granite quarry in Geor- gia. The production process begins when a 50-foot-tall block of solid granite is excavated from the mountain quarry. These huge blocks of granite are drilled and broken into movable smaller blocks for processing into building materials. The smaller blocks are cut into granite slabs of desired thickness and the granite slabs are then polished using abrasives and diamond polishing wheels to enhance the beauty of the granite. The slabs are then sorted by size. Some slabs will be cut to smaller dimensions due to natural imperfections in the stone. The larger pieces that cannot be used in slabs are broken up for decorative stone. Sand and stone dust result from cutting the 50-foot blocks out of the mountain, cutting these into smaller blocks, cutting these smaller blocks into slabs, and from producing the decorative stones. A 50-foot-tall block of granite produces the following finished products: Tons/Batch Cubic Feet/Batch (volume) Sand and stone dust Decorative stone Small 2" slabs (4' x 8') Large 2" slabs (4' x 12) 330.0 577.5 412.5 330.0 7.500 5,000 8.750 3,750 The cost of removing the 50-foot block from the mountain, cutting it into smaller blocks, and then the cost of cutting the slabs is $183,000. A 50-foot block produces, on average, 937.5 4'x 8' slabs and the cost of polishing one 4" x 8° slab is $96. A 50-foot block produces, on average, 500 4'x 12 slabs and the cost of polishing one 4x 12' slab is $144. The cost of finishing and packaging the 330 tons of sand and stone dust is $500, and the cost of further grinding and packaging the 577.5 tons of decorative stones is $2,500 Once each of the four products is finished (i.e., the sand and stone dust is finished and packaged and the slabs are polished), they are sold for the following amounts: Price/Ton Price/Slab Sand and stone dust Decorative stone Small 2" slabs (under 4' × 8') Large 2" slabs (4' x 12) $25.00 $75.00 S320.00 $480.00 Cost Allocation: Practices 383 Required: Allocate the $183,000 cost of removing the 50-foot block from the mountain, cutting it into smaller blocks, and cutting the smaller blocks into slabs to the four products using tons of each product produced from the 50-foot block as the allocation base. a. b. Calculate the total profits of producing each of the four products and the total profit of pro- cessing a 50-foot block after allocating the $183,000 cost to the four products using tons of each product produced from part (a). Allocate the $183,000 cost of removing the 50-foot block from the mountain, cutting it into smaller blocks, and cutting the smaller blocks into slabs to the four products using the cubic feet (volume) of each product produced from the 50' X 20"X 20' block as the allocation base. c. d. Calculate the total profits of producing cach of the four products and the total profit of processing a 50-foot block from the mountain after allocating the $183,000 cost to the four products using cubic feet (volume) of each product produced from part (c e. Which of the four products (i.e., sand and stone dust, decorative stones, the 4 x 8 slabs and the 4 x 12' slabs) should Columbine sell and which ones should not be sold? Assume that the products Columbine decides not to sell can be used as fill material in the quarry There is no cost of hauling the unsold products back to the quarry, and any unsold products do not incur the additional processing costs (i.e, the sand and stone dust does not require any packaging, the decorative stones do not require further grinding and packaging, or the 4'x 8 and 4' x 12' slabs do not require any polishing). Justify your answer. f Should Columbine Granite use tons or cubic feet (volume) to allocate the $183,000 cost of removing the 50-foot block from the mountain, cutting it into smaller blocks, and cutting the smaller blocks into slabs to the four products? Justify your recommendation based on well-reasoned argumentsExplanation / Answer
a Allocation on tons of production Tons/Batch % (Tons/1650)*100 Allocation 183000*% Sand and Stone Dust 330 20 36600 Decorative Dust 577.5 35 64050 Small Slab 412.5 25 45750 Large Slab 330 20 36600 1650 100 183000 b Profitability Sand and Stone Dust Decorative Dust Small Slab Large Slab Total A Selling Price 25 75 320 480 B Unit From 50 foo block 330 578 937.5 500 A*B=C Sales Revenue 8250 43313 300000 240000 591563 D Less: Polishing Cost (Cost* Unit) 90000 70000 160000 E Less: Finishing (Cost* Unit) 500 2500 3000 F Less: Overhead Allocated in Part-1 36600 64050 45750 36600 183000 C-D-E-F Total Profit -28850 -23237.5 164250 133400 245563 c Allocation on cubic Feet Cubic Feet % (Tons/25000)*100 Allocation 183000*% Sand and Stone Dust 7500 30 54,900 Decorative Dust 5000 20 36,600 Small Slab 8750 35 64,050 Large Slab 3750 15 27,450 25000 100 1,83,000 d Profitability Sand and Stone Dust Decorative Dust Small Slab Large Slab Total A Selling Price 25 75 320 480 B Unit From 50 foo block 330 578 937.5 500 A*B=C Sales Revenue 8250 43313 300000 240000 591563 D Less: Polishing Cost (Cost* Unit) 90000 70000 160000 E Less: Finishing (Cost* Unit) 500 2500 3000 F Less: Overhead Allocated in Part-1 54900 36600 64050 27450 183000 C-D-E-F Total Profit -47150 4213 145950 142550 245563
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