A sawmill processes logs into four grades of lumber totaling 500,000 board feet as follows at a joint cost of $300,000:
- What is the gross profit of No.3 common if the constant gross margin percentage method is used?

Question

A sawmill processes logs into four grades of lumber totaling 500,000 board feet as follows at a joint cost of $300,000: 
- What is the gross profit of No.3 common if the constant gross margin percentage method is used?

Quizplus · Accepted Answer

The constant gross margin percentage method allocates the gross profit to each product line based on its sales revenue. In this case, the gross profit percentage is 27% ($168,750 / $625,000). Therefore, the gross profit of No.3 common is $45,900 (27% x $168,750).

A Sawmill Processes Logs into Four Grades of Lumber Totaling