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Question
A sawmill bought a shipment of logs for $40,000. When cut, the logs produced 1 million board feet of lumber in the following grades:
Type 1 - 400,000 bd. ft. priced to sell at $0.12 per bd. ft.
Type 2 - 400,000 bd. ft. priced to sell at $0.06 per bd. ft.
Type 3 - 200,000 bd. ft. priced to sell at $0.04 per bd. ft.
How much cost should be allocated to Type 1 and Type 2, respectively?
| Type 1 | Type 2 | |
| A. | $16,000 | $16,000 |
| B. | $13,333 | $ 4,444 |
| C. | $40,000 | $24,000 |
| D. | $24,000 | $12,000 |
| E. | $24,000 | $ 8,000 |
Answer
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