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
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 134,000 logs at a total cost of $359,000. The output of the process consisted of 34,900 units of grade A, 51,900 units of grade B, and 15,900 units of sawdust. The sawdust can be sold for $29,160. 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.)
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