Luxury Company processes copper ore into two products,C and U.The ore costs $5 per pound and conversion costs are $15 per pound.Luxury Company plans to produce 40,000 pounds of Product C and 20,000 pounds of Product U from 60,000 pounds of ore.Product C sells for $30 per pound and Product U sells for $40 per pound.Assume the company uses the physical-units method of allocating joint costs.What amount of joint costs is allocated to Product U?
A)$0
B)$100,000
C)$300,000
D)$400,000

Question

Quizplus · Accepted Answer

Total joint cost = $5/pound * 60,000 pounds + $15/pound * 60,000 pounds
Total joint cost = $300,000
Joint cost allocated to Product C = ($5/pound * 40,000 pounds)/($5/pound * 60,000 pounds + $15/pound * 60,000 pounds) * $300,000
Joint cost allocated to Product C = $120,000
Joint cost allocated to Product U = ($5/pound * 20,000 pounds)/($5/pound * 60,000 pounds + $15/pound * 60,000 pounds) * $300,000
Joint cost allocated to Product U = $80,000
Therefore, the amount of joint costs allocated to Product U is $80,000 or choice D.

Luxury Company Processes Copper Ore into Two Products,C and U