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home / study / business / accounting / questions and answers / the carolina company prepares lumber for companies ... 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 manufactures. 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. Prepare an income statement showing the byproduct (1) as a cost reduction during production, and (2) as a revenue item when sold

Explanation / Answer

     1 Carolina Company Income Statement for July Details Amt $ Sales Revenue (80000 board ft@$6)             480,000 Cost of Manufacture             332,000 Less: Shavings sold (6800 lb @$0.60)                (4,080) Net Cost Of Manufacture             327,920 Net Operating income             152,080      2 Carolina Company Income Statement for July Details Amt $ Sales Revenue -Lumber (80000 board ft@$6)             480,000 Sales Revenue -Shaving (6800 lb @$0.60)                  4,080 Total Revenue             484,080 Cost of Manufacture             332,000 Net Operating income             152,080

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