Suppose That a Sawmill Processes Logs into Four Grades of Lumber

question 11

Multiple Choice

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?

• A)$36,000
• B)$115,200
• C)$120,000
• D)$300,000

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Definitions:

Cash Dividend

A payment made by a company out of its earnings to shareholders in the form of cash.

Market Price

The current rate for transactions involving a service or asset.

Stock Dividend

A stock dividend is a distribution of additional shares of a company's stock to its shareholders instead of cash dividends.

Paid-in Capital

The amount of money that a company has received from shareholders in exchange for shares of stock.