Question

Blasto, Inc., operates several mines. At one, a typical batch of ore run through the plant yields three products: lead, copper, and manganese. At the split-off point, the intermediate products cannot be sold without further processing. The lead from a typical batch sells for $40,000 after incurring additional processing costs of $12,000. The copper is sold for $80,000 after additional processing costs of $10,000, and the manganese yield sells for $60,000 but requires additional processing costs of $18,000. The joint costs of processing the raw ore, including the cost of mining, are $100,000 per batch.

Required:

Use the estimated net realizable value method to allocate the joint processing costs.

.

Lead Copper Manganese Approximate sales value at split-off Percent of total sales values at split-off % % % Cost allocation

Answer 1

• Working

Working		Lead	Copper	Manganese	Total
A	Sales	$          40,000.00	$          80,000.00	$          60,000.00
B	Additional Cost	$          12,000.00	$          10,000.00	$          18,000.00
C = A - B	Net Realizable value	$          28,000.00	$          70,000.00	$          42,000.00	$ 140,000.00

• Answer

	Lead	Copper	Manganese
Approximate Sales value at Split off	$          28,000.00	$          70,000.00	$          42,000.00
% of total sales values at split off	20%	50%	30%
Cost Allocation	$          20,000.00	$          50,000.00	$          30,000.00

--Working

	Lead	Copper	Manganese
Approximate Sales value at Split off	28000	70000	42000
% of total sales values at split off	=28000/140000	=70000/140000	=42000/140000
Cost Allocation	=100000*20%	=100000*50%	=100000*30%