A Lumber Mill Paid $70,000 for Logs That Produced 200,000

question 174

Multiple Choice

A lumber mill paid $70,000 for logs that produced 200,000 board feet of lumber in 3 different grades and amounts as follows: Compute the portion of the $70,000 joint cost to be allocated to No.2 Common if the value basis is used.

• A)$0.
• B)$17,500.
• C)$23,333.
• D)$35,000.
• E)$70,000.

---

Definitions:

Minimum Required Rate

The lowest acceptable rate of return on an investment, as determined by management or investors.

Residual Income

The amount of income that an individual or company retains after accounting for all operating expenses and cost of capital.

Operating Assets

Assets that are used by a company in its daily operations to generate revenue, excluding any investment or non-operational assets.

Net Operating Income

The profit derived from a company's regular business activities, excluding deductions of interest and taxes.