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    The Carolina Company prepares lumber for companies

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    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 $6.00 per board foot and the shavings sold for $0.60 a pound. There were no beginning or ending inventories.

    Required:
    Prepare an income statement showing the byproduct (1) as a cost reduction during production, and (2) as a revenue item when sold.

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    Solution Preview

    Please see attached file, thanks.

    Sale revenue of:
    ? Lumber = $6 x 80,000 = $480,000
    ? Savings = $.6*6,800 = $4,080

    Thus ...

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