The Carolina Company prepares lumber for companies who manufacture furniture. Th
ID: 2590282 • Letter: T
Question
The Carolina Company prepares lumber for companies who manufacture furniture. The main product is finished lumber with a byproduct of wood shavings The byproduct is sold to plywood manufacturers. For July, the manufacturing process incurred $332.000 in total costs. Eighty thousand board feet of lumber were produced and sold along with 6,800 pounds of shavings. The finished lumber sold for $8.00 per board foot and the shavings sold for $0.80 a pound. There were no beginning or ending inventories Prepare an income statement showing the byproduct (1) as a cost reduction during production, and (2) as a revenue item when sold Cost reduction when Revenue when sold produced Sales: Lumber Shavings Total Sales: Cost of Good Sold Total manufacturing costs Byproduct Total COGS Gross MarginExplanation / Answer
Cost reduction when produced
Revenue when sold
Sales: Lumber
Shavings
80000 board feet
80000*8 = 640000
80000 board feet
6800 pounds
80000*8 = 640000
6800*0.8 = 5440
Total Sales:
80000 board feet
640000
645440
Cost of Good Sold:
Total manufacturing costs
By Product
332000
(6800*0.8) = (5440)
32000
Total COGS
326560
332000
Gross Margin
640000 – 326560 = 313440
645440 – 332000 = 313440
Cost reduction when produced
Revenue when sold
Sales: Lumber
Shavings
80000 board feet
80000*8 = 640000
80000 board feet
6800 pounds
80000*8 = 640000
6800*0.8 = 5440
Total Sales:
80000 board feet
640000
645440
Cost of Good Sold:
Total manufacturing costs
By Product
332000
(6800*0.8) = (5440)
32000
Total COGS
326560
332000
Gross Margin
640000 – 326560 = 313440
645440 – 332000 = 313440
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