Question

In: Economics

In a sawmill, boards and pellets are produced (from the residues that do not become boards)....


In a sawmill, boards and pellets are produced (from the residues that do not become boards). The common costs the sawmill has before the split point in production (for drying, storage and handling) amount to SEK 600,000 per year. A total of 2,000 tonnes of boards and 800 tonnes of pellets are produced during the year. The sales price per tonne of sawn boards is SEK 6,000 and SEK 900 per tonne of pellets.

A. Allocate the common costs according to the division method.

B. Distribute the common costs according to the sales value.

Solutions

Expert Solution

SOLUTION :

a) Division Method :

BOARDS - Total cost per year = SEK 428571.4

Cost per tonne = SEK 214.2857

Pellets - Total cost per year = SEK 171428.6

Cost per tonne = SEK 214.28575

b) SALES VALUE Method :

BOARDS - Total cost per year = SEK 566037.7

Cost per tonne = SEK 283.01885

PELLETS - Total cost per year = SEK 33962.3

Cost per tonne = SEK 42.452875


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