Blasto, Inc., operates several mines. At one, a typical batch of ore run through

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 $64,000 after incurring additional processing costs of $22,000. The copper is sold for $114,000 after additional processing costs of $14,000, and the manganese yield sells for $72,000 but requires additional processing costs of $14,000. The joint costs of processing the raw ore, including the cost of mining, are $225,000 per batch. Required: Use the estimated net realizable value method to allocate the joint processing costs. (Do not round intermediate calculations.)

Explanation / Answer

answer

ALLOCATION OF JOINT COST UNDER NET REALIZABLE VALUE METHOD ;

LEAD COPPER MAGANESE TOTAL

SALES VALUE 64000 114000 72000 250000

LESS: ADDITIONAL COST (22000) (14000) (14000) (50000)

NET REALIZABLE VALUE 28000 70000 42000 140000

PERCENTAGE OF TOTAL SALES VALUES AT SPLIT OFF 20% 50% 30% 100%

COST ALLOCATION 225000*20%=45000 225000*50%=112500 225000*30%=67500 225000

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