Trans-Pacific Lumber runs a mill in the Northwest that produces two grades of lu

Question

Trans-Pacific Lumber runs a mill in the Northwest that produces two grades of lumber, A and B, and a by-product, sawdust. The company chooses to allocate the costs on the basis of the physical quantities method. Last month, it processed 129,000 logs at a total cost of $354,000. The output of the process consisted of 34,400 units of grade A, 51,400 units of grade B, and 15,400 units of sawdust. The sawdust can be sold for $10,800. This is considered to be its net realizable value, which is deducted from the processing costs of the main products. Required: What share of the joint costs should be assigned to grade A and grade B? (Do not round intermediate calculations.)

Explanation / Answer

Answer

  

343200 / 99000*34400 = 119253

Processing cost 354000 Less; value scrap -10800 Net Processing cost 343200 Grade A

343200 / 99000*34400 = 119253

Grade B 343200/ 99000*51400 = 178187

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