Question: On July 1, 2011, Casa Development Co. purchased a tract of land for $1,200,000. Casa incurred additional cost of $300,000 during the remainder of 2011

On July 1, 2011, Casa Development Co. purchased a tract of land for $1,200,000. Casa incurred additional cost of $300,000 during the remainder of 2011 in preparing the land for sale. The tract was subdivided into residential lots as follows:

Lot class Number of lots Sales price per lot A 100 $24,000 B 100 16,000 C 200 10,000 Using the relative sales value method, what amount of costs should be allocated to the Class A lots?

a. $300,000

b. $375,000

c. $600,000

d. $720,000

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