Chapter 11, Problem 38E

Estimated Net Realizable Value Method

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 $40,000 after incurring additional processing costs of $12,000. The copper is sold for $80,000 after additional processing costs of $10,000, and the manganese yield sells for $60,000 but requires additional processing costs of $18,000. The joint costs of processing the raw ore, including the cost of mining, are $100,000 per batch.

Required

Use the estimated net realizable value method to allocate the joint processing costs.