Quebec Metals buys raw ore on the open market and processes it into two final products, A
Question:
Quebec Metals buys raw ore on the open market and processes it into two final products, A and B. The ore costs $10 per kilogram, and the process separating it into A and B has a cost of $4 per kilogram. During 2012, Quebec plans to produce 200,000 kilograms of A and 600,000 kilograms of B from 800,000 kilograms of ore; A sells for $30 a kilogram and B for $15 a kilogram. The company allocated joint costs to the individual products for inventory valuation purposes.
1. Allocate all the joint costs to A and B using the physical units method.
2. Allocate all the joint costs to A and B using the relative-sales-value method.
3. Suppose B cannot be sold in the form in which it emerges from the joint process. Instead, it must be processed further at a fixed cost of $300,000 plus a variable cost of $1 per kilogram. Then, it can be sold for $21.50 a kilogram. Allocate all the joint costs to A and B using the relative-sales-value method.
Step by Step Answer:
Management Accounting
ISBN: 978-0132570848
6th Canadian edition
Authors: Charles T. Horngren, Gary L. Sundem, William O. Stratton, Phillip Beaulieu