Question

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.

Answer 1

Answer - Profit associated with Copper = $33,494.52

Explanation -

Note - 1 pound = 16 ounces

• Sales value of Gold = $325 per ounce * 250 pounds of gold * 16 ounces

Sales value of Gold = $1,300,000

• Sales value of Copper = 62,500 pounds of copper * copper sells for $0.85 per pound

Sales value of Copper - $53,125

Cost Allocated to copper using relative sales method = Sales value of Copper / (Sales value of Copper+sales value of Gold)* Joint cost related to the operation

= $53,125/($53,125+$1,300,000)* $500,000

= $19,630.48

Profit associated to Copper= Sales value of Copper - Cost Allocated to copper

= $53,125 - $19,630.48

Profit associated to Copper = $33,494.52