Landmark Coal operates a mine. During July, the company obtained 500 tons of ore, which yielded...

Landmark Coal operates a mine. During July, the company obtained 500 tons of ore, which yielded 250 pounds of gold and 63,400 pounds of copper. The joint cost related to the operation was $500,000. Gold sells for $325 per ounce and copper sells for $0.91 per pound. Allocate the joint costs using the relative sales values. With these costs, what is the profit or loss associated with Copper? Round to two decimal places

Solutions

Expert Solution

Here we use relative sales value method to allocate joint costs, therefore first we have to find the sales value of both products-

Sales value of gold= Number of pounds* Selling price per unit

ie., 250*325 = 81250

Sales value of copper = 63400*0 .91= 57694

Total sales value of both products= 81250+57694

=138944//

Joint cost is 500000 (given in the question).

Equation to calculate joint cost allocated to gold is-

Joint cost/Total sales value of all product * Sales value of gold.

ie., 500000/138944 * 81250

= 292383.98//

Therefore joint cost allocated to gold is 292383.98.

Now we have to calculate the joint cost allocated to copper-

Joint cost/ Total value of all product * Sales value of copper

ie., 500000/138944 * 57694

= 207616.01//

Therefore joint cost allocated to copper is 207616.01.

Now we can find the profit or loss associated with copper-

It is calculated by substracting the joint cost allocated to copper from the sales value of copper-

ie., 57694 - 207616.01

= (149922.01) Answer is a negative amount which means it is a loss.

Therefore the loss associated with copper is 149922.01.

ekkarill92 answered 1 year ago

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