Suppose That a Sawmill Processes Logs into Four Grades of Lumber

question 168

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: 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:

Depreciable Asset

An asset that loses value over time due to usage, wear and tear, or obsolescence, which can be an expense on the income statement over its useful life.

Fixed Asset

A long-term tangible piece of property or equipment that a firm owns and uses in its operations to generate income.

Intangible

Assets that lack physical substance but hold value for a firm, such as patents, trademarks, and goodwill.

Commercial Substance

An aspect of transactions indicating that it will result in a significant change in the economic circumstances of the participating entities.