A sawmill paid $70,000 for logs that produced 200,000 board feet of lumber in three different grades and amounts as follows:
$\begin{array}{lll}
\text {Grade}&\text {Production}&\text {Market Price}\
\text { Structural } & 25,000 \text { board feet } & \$ 1,350 / 1,000 \mathrm{bd} . \mathrm{ft} \text {. } \
\text { No. } 1 \text { Common } & 75,000 \text { board feet } & \$ 750 / 1,000 \mathrm{bd} . \mathrm{ft} \text {. } \
\text { No. } 2 \text { Common } & 100,000 \text { board feet } & \$ 300 / 1,000 \mathrm{bd} . \mathrm{ft}
\end{array}$
How much of the $70,000 joint cost should be allocated to No.2 Common?
A) $0
B) $17,500
C) $23,333
D) $35,000
E) $70,000

Question

A sawmill paid $70,000 for logs that produced 200,000 board feet of lumber in three different grades and amounts as follows:
$\begin{array}{lll}
\text {Grade}&\text {Production}&\text {Market Price}\
\text { Structural } & 25,000 \text { board feet } & \$ 1,350 / 1,000 \mathrm{bd} . \mathrm{ft} \text {. } \
\text { No. } 1 \text { Common } & 75,000 \text { board feet } & \$ 750 / 1,000 \mathrm{bd} . \mathrm{ft} \text {. } \
\text { No. } 2 \text { Common } & 100,000 \text { board feet } & \$ 300 / 1,000 \mathrm{bd} . \mathrm{ft}
\end{array}$ 
How much of the $70,000 joint cost should be allocated to No.2 Common?
A) $0
B) $17,500
C) $23,333
D) $35,000
E) $70,000

Quizplus · Accepted Answer

The joint cost should be allocated to each grade of lumber based on its relative sales value. The total sales value of the lumber is:Structural: 25,000 bd. ft. x $1,350/1,000 bd. ft. = $33,750No. 1 Common: 75,000 bd. ft. x $750/1,000 bd. ft. = $56,250No. 2 Common: 100,000 bd. ft. x $300/1,000 bd. ft. = $30,000The percentage of the total sales value that is attributable to No. 2 Common is:$30,000/$120,000 = 25%Therefore, the amount of the joint cost that should be allocated to No. 2 Common is:$70,000 x 25% = $17,500

A Sawmill Paid $70,000 for Logs That Produced 200,000 Board