Question

Landmark Coal operates a mine. During July, the company obtained 500 tons of ore, which yielded 250 pounds of gold and 63,400 pounds of copper. The joint cost related to the operation was $500,000. Gold sells for $325 per ounce and copper sells for $0.89 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

Calculation of allocation of cost and profit or loss associated with copper :

1 pound = 16 ounces

Sale value of gold = $325 per ounce × 250 pounds of gold × 16 ounces

= $1,300,000

Sale value of copper = 63,400 copper × $0.89 per pounds

= $56,426

Weights :

Total sale value = gold sale value + copper sale value

= $1,300,000 + $56,426

= $1,356,426

Gold = $1,300,000/$1,356,426

= 0.96

Copper = $56,426/$1,300,000

= 0.04

Allocation of joint cost:

For gold = joint cost × weight

= $500,000 × 0.96

= $480,000

For copper = joint cost × weight

= $500,000 × 0.04

= $20,000

Profit associated with the copper = sale value - joint cost Allocated

= $56,426 - $20,000

= $36,426

Profit associated with copper = $36,426