Suppose That a Sawmill Processes Logs into Four Grades of Lumber

question 36

Multiple Choice

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: $\begin{array}{lrr}\text { Grade }& \text { Board Feet } & \text { Final Sales Value }\\\text { First and second } & 75,000 & \$ 56,250 \\\text { No. } 1 \text { common } & 200,000 & 180,000 \\\text { No. } 2 \text { common } & 100,000 & 105,000 \\\text { No. } 3 \text { common } & 125,000 & 127,500\end{array}$ What amount of joint costs will be allocated to first and second using the physical units method?

• A)$300,000
• B)$45,000
• C)$36,000
• D)$225,000

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Definitions:

Fraction

A mathematical expression representing the division of one quantity by another, noted by a numerator divided by a denominator.

Marginal Revenue Product

The additional revenue generated by employing one more unit of a resource or input.

Marginal Cost

The additional cost of producing one more unit of a good or service.

Competitive Labor Market

A market where numerous employers are actively seeking to hire and numerous individuals are seeking employment, with wages determined by the supply and demand for labor.