Northwest Minerals operates a mine. During July, the company obtained 500 tons of ore, which yielded 250 pounds of gold and 62,500 pounds of copper. The joint cost related to the operation was $500,000. Gold sells for $325 per ounce and copper sells for $0.85 per pound.

Required

a. Allocate the joint costs using relative weight. With these costs, what is the profit associated with each mineral? What is the drawback of this approach?

b. Allocate the joint costs using the relative sales values. With these costs, what is the profit associated with each mineral?

c. With the relative sales value approach to allocation, what is the smallest value of joint cost that would result in copper showing a loss? What is the smallest value of joint cost that would result in gold showing a loss?