In: Economics
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.
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