A lumber mill bought a shipment of logs for $58,000. When cut, the logs produced
ID: 2436450 • Letter: A
Question
A lumber mill bought a shipment of logs for $58,000. When cut, the logs produced a million board fet of lumber in the following grades. Compute the cost to be allocted to Type 1 and Type 2 lumber. respectively. If the value basis is used. (Do not round your intermidiate calculations)
Type 1 - 400,000 bd. ft. priced to sell at $0.12 per bd. ft.
Type 2 - 400,000 bd. ft. priced to sell at $0.06 per bd. ft.
Type 3 - 400,000 bd. ft. priced to sell at $0.04 per bd. ft.
Multiple Choice -
A $34,800; $17,400
B 584,000; $24,000
C $16,000; $16,600
D $24,000; $8,000
E $10,944; $5,800
Explanation / Answer
Solution: $34,800; $17,400
Working:
Total sales: 80,000
A
B
A/B
400,000
0.12
48000
400,000
0.06
24000
200,000
0.04
8000
80000
Allocation of cost (58,000):
Type 1: 48,000 / 80,000 * 58,000 = 34,800
Type 2: 24,000 / 80,000 * 58,000 = 17,400
A
B
A/B
400,000
0.12
48000
400,000
0.06
24000
200,000
0.04
8000
80000
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