Figure 6-6
Suppose that a sawmill processes logs into four grades of lumber totaling 500,000 board feet as follows at a joint cost of £300,000: $$\begin{array} { l c c }
\text { Grade } & \text { Board Feet } & \text { Final Sales Value } \
\text { First and second } & 75,000 & £ 56,250 \
\text { No. } 1 \text { common } & 200,000 & 180,000 \
\text { No. } 2 \text { common } & 100,000 & 105,000 \
\text { No. } 3 \text { common } & 125,000 & 127,500
\end{array}$$
-Refer to Figure 6-6. What amount of joint costs will be allocated to No. 2 common using the constant gross margin percentage method?
A)£300,000
B)£37,800
C)£67,200
D)£192,000

Question

Figure 6-6
Suppose that a sawmill processes logs into four grades of lumber totaling 500,000 board feet as follows at a joint cost of £300,000: $$\begin{array} { l c c } 
\text { Grade } & \text { Board Feet } & \text { Final Sales Value } \
\text { First and second } & 75,000 & £ 56,250 \
\text { No. } 1 \text { common } & 200,000 & 180,000 \
\text { No. } 2 \text { common } & 100,000 & 105,000 \
\text { No. } 3 \text { common } & 125,000 & 127,500
\end{array}$$
-Refer to Figure 6-6. What amount of joint costs will be allocated to No. 2 common using the constant gross margin percentage method?
A)£300,000
B)£37,800
C)£67,200
D)£192,000

Quizplus · Accepted Answer

The constant gross margin percentage method allocates joint costs based on the final sales value minus a constant gross margin percentage. First, calculate the total sales value (£468,750) and the gross margin (£168,750). The gross margin percentage is 36% (£168,750/£468,750). For No. 2 common, the sales value is £105,000, and the gross margin is £37,800 (36% of £105,000). The joint cost allocated is £67,200 (£105,000 - £37,800).

Figure 6-6 Suppose That a Sawmill Processes Logs into Four

Figure 6-6
Suppose That a Sawmill Processes Logs into Four