Joint production and retail: by-product and retail method

Sawmill management accounting report, 20X3: logs consumed 600,000; direct labour 150,000; variable production overheads 50,000; fixed production overheads 100,000, allocated on the actual production of 5,000 m³ of sawn timber, equal to normal capacity (average production of the last three years, taking into account planned maintenance shutdowns); joint costs up to the split-off point 900,000. Costs are not separately identifiable by product before that point. The sales director suggests allocating fixed overheads on the maximum capacity of the saws, 6,500 m³, in order to reduce the unit cost.