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 62,500 pounds of copper. The joint cost related to the operation was $500,000. Gold sells for $325 per ounce and copper sells for $0.85 per pound. Allocate the joint costs using relative weight. With these costs, what is the profit or loss associated with Copper?

Round to two decimal places.

Solutions

Expert Solution

The profit associated with copper is $33,494.52.

Explanation:

● Selling price of gold per ounce = $325

1 pound = 16 ounce

250 pounds = 250 × 16 = 4,000 ounce

250 pounds of gold = 4,000 ounce of Gold

Sales value of Gold = Selling price per ounce × Total ounce of Gold
= $325 × 4,000 = $1,300,000

● Selling price of copper per pound = $0.85

Total pounds of Copper = 62,500

Sales value of Copper = Selling price per pound × Total pounds of Copper
= $0.85 × 62,500 = $53,125

● Weight allocated to copper using relative sales method = Sales value of Copper/(Sales value of Copper + Sales value of Gold) = $53,125 / ($53,125 + $1,300,000) = 0.0392609699769

● Cost Allocated to copper = Joint cost related to the operation × Weight allocated to copper = $500,000 × 0.0392609699769 = $19,630.48498845 = $19,630.48

● Profit associated with Copper = Sales value of Copper - Cost allocated to copper = $53,125 - $19,630.48 = $33,494.52

Therefore, the profit associated with copper is $33,494.52.

ekkarill92 answered 1 year ago

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