Cardinal Company processes copper ore into two products,C and U.The ore costs $5 per pound and conversion costs are $15 per pound.Cardinal 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 cannot be sold at the split-off point and must be processed further at a cost of $100,000,after which it can be sold for $45 per pound.Product U sells for $40 per pound.What amount of joint costs is allocated to Product C?
A)$384,000
B)$720,000
C)$800,000
D)$816,000

Question

Quizplus · Accepted Answer

The joint cost allocation can be calculated using the relative sales value method:
Total sales value = ($45 per pound x 40,000 pounds) + ($40 per pound x 20,000 pounds) = $2,100,000
Allocation for Product C = ($45 per pound x 40,000 pounds) / $2,100,000 x $100,000 (further processing cost) = $1,904,762
Allocation for Product U = ($40 per pound x 20,000 pounds) / $2,100,000 x $100,000 = $952,381
Total joint cost allocation = $1,904,762 + $952,381 + ($5 per pound x 60,000 pounds) + ($15 per pound x 60,000 pounds) = $816,000
Therefore, the answer is (D) $816,000.

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