Santelle Company processes copper ore into two products,C and U.The ore costs $5 per pound and conversion costs are $15 per pound.Santelle 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 relative-sales-value method of allocating joint costs.What amount of joint costs is allocated to Product U?
A) $0
B) $400,000
C) $480,000
D) $685,714

Question

Quizplus · Accepted Answer

Using the relative-sales-value method, the joint cost allocation for Product C is:
Relative sales value of Product C = ($30 x 40,000 pounds) / [($30 x 40,000 pounds) + ($40 x 20,000 pounds)] = 0.6
Joint costs allocated to Product C = $15 per pound x 60,000 pounds x 0.6 = $540,000 x 0.6 = $324,000

Joint costs allocated to Product U = $15 per pound x 60,000 pounds - $324,000 = $576,000 - $324,000 = $252,000

Therefore, the answer is C, which is the amount of joint costs allocated to Product U ($252,000).

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