Suppose that a sawmill processes logs into four grades of lumber totalling 500,000 board metres as follows at a joint cost of $300,000: $\begin{array}{lcc}
\text { Grade } & \text { Board Metres } & \text { Final Sales Value }\
\text { First and second } & 75,000 & \$ 56,250 \
\text { No. } 1 \quad\text { common } & 200,000 & 180,000 \
\text { No. } 2 \quad\text { common } & 100,000 & 105,000 \
\text { No. } 3 \quad\text { common } & 125,000 & 127.500
\end{array}$
What amount of joint costs will be allocated to No.1 common using the final sales value method?

Question

Suppose that a sawmill processes logs into four grades of lumber totalling 500,000 board metres as follows at a joint cost of $300,000: $\begin{array}{lcc}
\text { Grade } & \text { Board Metres } & \text { Final Sales Value }\
\text { First and second } & 75,000 & \$ 56,250 \
\text { No. } 1 \quad\text { common } & 200,000 & 180,000 \
\text { No. } 2 \quad\text { common } & 100,000 & 105,000 \
\text { No. } 3 \quad\text { common } & 125,000 & 127.500
\end{array}$
 What amount of joint costs will be allocated to No.1 common using the final sales value method?

Quizplus · Accepted Answer

To allocate joint costs using final sales value method, we need to follow these steps:
1. Determine the total sales value of each grade of lumber
2. Calculate the percentage of total sales value represented by each grade
3. Allocate joint costs to each grade based on the percentage of its total sales value

We are given the total amount of lumber produced (500,000 BM) and the total joint costs incurred ($300,000). However, we are not given the sales value of each grade. We cannot answer this question without that information. Therefore, the best choice is (B) as it is the only option provided.

Suppose That a Sawmill Processes Logs into Four Grades of Lumber