A method for determining the cost of manufacturing individual logs into lumber

A method is proposed for determining sawmill variable costs for individual logs and computing total fixed costs of manufacturing lumber. The methodology is based on standard accounting practices and the principles of production economics. Processing time functions are derived for each machine center, a detailed cost analysis is completed for the mill, and the data are combined to estimate log variable costs and mill fixed costs. The methodology was applied to a case study mill in the interior of British Columbia to compute the variable costs for a range of log diameters typically processed at the mill. Application of the procedures can help in the maximization of profits at sawmills by insuring that only logs with positive contributions to profits are sawn.

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