Total Mining Company produces two products from ore, copper and zinc. The following events took place in May:
|
Copper
|
Zinc
|
Total
|
|
Units produced
|
40,000
|
60,000
|
100,000
|
|
Unit selling price
|
$2.00
|
$1.oo
|
|
Joint costs incurred were $110,000.
(a) Allocate the joint costs to the two products using the physical measures method.
(b) Allocate the joint costs to the two products using the relative sales value method.
(c) Explain the difference in unit costs using the two methods.
(d) Which method do you think better allocates joint costs? Why?