Lux Company processes copper ore into two products, C and U.The ore costs $5 per pound and conversion costs are $15 per pound.Lux Company plans to produce 40,000 pounds of C and 20,000 pounds of U from 60,000 pounds of ore.C sells for $30 per pound and U sells for $40 per pound.Assuming the physical-units method of allocating joint costs, the amount of joints costs allocated to product U would be _____.
A)$800,000
B)$400,000
C)$300,000
D)$100,000

Question

Quizplus · Accepted Answer

$400,000The physical-units method allocates joint costs based on the proportion of physical units produced. The total joint costs are the sum of ore costs ($5/pound * 60,000 pounds = $300,000) and conversion costs ($15/pound * 60,000 pounds = $900,000), totaling $1,200,000. Product U's allocation is based on its proportion of total production (20,000 pounds out of 60,000 pounds, or 1/3 of total production). Therefore, 1/3 of $1,200,000 is allocated to U, which is $400,000.

Lux Company Processes Copper Ore into Two Products, C and U.The