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: 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:  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 relative final sales value of each product. Since no information is given on the final sales value of each grade of plywood, we must use the relative weight method to calculate the weighting percentages.

No. 1 common represents 30% of the total weight (150,000 board feet out of 500,000), so the joint cost allocated to No. 1 common using the final sales value method would be:

$450,000 x 30% = $135,000

However, since we are given the answer choices in thousands of dollars, we need to divide by 1,000:

$135,000 / 1,000 = $135

Therefore, the closest answer choice is A) $172,800, which is incorrect. The correct answer is A) $135, which is not listed as an option.

Suppose That a Plywood Manufacturer Processes Wood Pulp into Four