Suppose that a Plywood manufacturer processes wood pulp into four grades of Plywood totaling 500,000 board feet as follows at a joint cost of $450,000: $$\begin{array} { l c c }
\text { Grade } & \text { Board Feet } & \text { Final Sales Value } \
\hline \text { First and second } & 75,000 & \$ 56,250 \
\text { No. } 1 \text { common } & 200,000 & 180,000 \
\text { No. } 2 \text { common } & 100,000 & 105,000 \
\text { No. } 3 \text { common } & 125,000 & 127,500
\end{array}$$ What amount of joint costs will be allocated to No. 1 common using the final sales value method?

Question

Suppose that a Plywood manufacturer processes wood pulp into four grades of Plywood totaling 500,000 board feet as follows at a joint cost of $450,000: $$\begin{array} { l c c } 
\text { Grade } & \text { Board Feet } & \text { Final Sales Value } \
\hline \text { First and second } & 75,000 & \$ 56,250 \
\text { No. } 1 \text { common } & 200,000 & 180,000 \
\text { No. } 2 \text { common } & 100,000 & 105,000 \
\text { No. } 3 \text { common } & 125,000 & 127,500
\end{array}$$ What amount of joint costs will be allocated to No. 1 common using the final sales value method?

Quizplus · Accepted Answer

The final sales value method allocates joint costs based on the proportion of each product's final sales value to the total sales value. The total sales value is $56,250 (First and second) + $180,000 (No. 1 common) + $105,000 (No. 2 common) + $127,500 (No. 3 common) = $468,750. The proportion for No. 1 common is $180,000 / $468,750. The joint cost allocated to No. 1 common is this proportion multiplied by the total joint cost of $450,000, which equals $172,800.

Suppose That a Plywood Manufacturer Processes Wood Pulp into Four