Question

Blasto, Inc., operates several mines. At one, a typical batch of ore run through the plant yields three products: lead, copper, and manganese. At the split-off point, the intermediate products cannot be sold without further processing. The lead from a typical batch sells for $50,000 after incurring additional processing costs of $15,350. The copper is sold for $94,000 after additional processing costs of $11,500, and the manganese yield sells for $65,000 but requires additional processing costs of $17,150. The joint costs of processing the raw ore, including the cost of mining, are $155,000 per batch.

Required:
Use the estimated net realizable value method to allocate the joint processing costs. (Do not round intermediate calculations.)
Lead Copper Manganese
Approximate sales value at split-off
Percent of total sales values at split-off % % %
Cost allocation

Answer 1

joint processing costs allocated to lead = $32,550

joint processing costs allocated to copper = $77,500

joint processing costs allocated to manganese = $44,950

Step-by-step explanation:

lead can be sold at $50,000 but needs further processing worth $15,350, so net realizable value = $50,000 - $15,350 = $34,650

copper can be sold at $94,000 but needs further processing worth $11,500, so net realizable value = $94,000 - $11,500 = $82,500

manganese can be sold at $65,000 but needs further processing worth $17,150, so net realizable value = $65,000 - $17,150 = $47,850

total realizable value = $165,000

total joint processing costs = $155,000

allocation rate of processing cost = $155,000 / $165,000 = $0.939393 per dollar of net realizable value

joint processing costs allocated to lead = $0.939393 x $34,650 = $32,550

joint processing costs allocated to copper = $0.939393 x $82,500 = $77,500

joint processing costs allocated to manganese = $0.939393 x $47,850 = $44,950