Question

Columbine Granite produces a number of different granite products from its granite quarry in Georgia. The production process begins when a 50- foot- tall block of solid granite is excavated from the mountain quarry. These huge blocks of granite are drilled and broken into movable smaller blocks for processing into building materials. The smaller blocks are cut into granite slabs of desired thickness and the granite slabs are then polished using abrasives and diamond polishing wheels to enhance the beauty of the granite. The slabs are then sorted by size. Some slabs will be cut to smaller dimensions due to natural imperfections in the stone. The larger pieces that cannot be used in slabs are broken up for decorative stone. Sand and stone dust result from cutting the 50- foot blocks out of the mountain, cutting these into smaller blocks, cutting these smaller blocks into slabs, and from producing the decorative stones. A 50- foot- tall block of granite produces the following finished products:


The cost of removing the 50- foot block from the mountain, cutting it into smaller blocks, and then the cost of cutting the slabs is $ 183,000. A 50- foot block produces on average 937 ½ 4' 8' slabs and the cost of polishing one 4' 8' slab is $ 96. A 50- foot block produces on average 500 4' 12' slabs and the cost of polishing one 4' 12' slab is $ 144. The cost of finishing and pack-aging the 330 tons of sand and stone dust is $ 500, and the cost of further grinding and packaging the 577.5 tons of decorative stones is $ 2,500.
Once each of the four products is finished ( i. e., the sand and stone dust is finished and packaged and the slabs are polished), they are sold for the following amounts:



Required:
a. Allocate the $ 183,000 cost of removing the 50- foot block from the mountain, cutting it into smaller blocks, and cutting the smaller blocks into slabs to the four products using tons of each product produced from the 50- foot block as the allocation base.
b. Calculate the total profits of producing each of the four products and the total profit of processing a 50- foot block after allocating the $ 183,000 cost to the four products using tons of each product produced from part ( a ) above.
c. Allocate the $ 183,000 cost of removing the 50- foot block from the mountain, cutting it into smaller blocks, and cutting the smaller blocks into slabs to the four products using the cubic feet (volume) of each product produced from the 50' 20' 20' block as the allocation base.
d. Calculate the total profits of producing each of the four products and the total profit of processing a 50- foot block from the mountain after allocating the $ 183,000 cost to the four products using cubic feet ( volume) of each product produced from part ( c ) above.
e. Which of the four products ( i. e., sand and stone dust, decorative stones, the 4' 8' slabs, and the 4' 12' slabs) should Columbine sell and which ones should not be sold? Assume that the products Columbine decides not to sell can be used as fill material in the quarry. There is no cost of hauling the unsold products back to the quarry, and any unsold products do not incur the additional processing costs ( i. e., the sand and stone dust does not require any packaging, the decorative stones do not require further grinding and packaging, or the 4' 8' and 4' 12' slabs do not require any polishing). Justify your answer.
f. Should Columbine Granite use tons or cubic feet ( volume) to allocate the $ 183,000 cost of removing the 50- foot block from the mountain, cutting it into smaller blocks, and cutting the smaller blocks into slabs to the four products? Justify your recommendation based on well- reasonedarguments.


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  • CreatedDecember 15, 2014
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