Question
Allocating Joint Costs Using the Physical Units Method Orchard Fresh, Inc., purchases apples from local orchards and sorts them into four categories. Grade A are
Allocating Joint Costs Using the Physical Units Method
Orchard Fresh, Inc., purchases apples from local orchards and sorts them into four categories. Grade A are large blemish-free apples that can be sold to gourmet fruit sellers. Grade B apples are smaller and may be slightly out of proportion. These are packed in boxes and sold to grocery stores. Apples for slices are even smaller than Grade B apples and have blemishes. Apples for applesauce are of lower grade than apples for slices, yet still suitable for canning. Information on a recent purchase of 20,000 pounds of apples is as follows:
Grades | Pounds |
Grade A | 1,600 |
Grade B | 5,000 |
Slices | 8,000 |
Applesauce | 5,400 |
Total | 20,000 |
Total joint cost is $18,000.
Required:
1. Allocate the joint cost to the four grades of apples using the physical units method.
Joint Cost | |
Grades | Allocation |
Grade A | $fill in the blank 1 |
Grade B | fill in the blank 2 |
Slices | fill in the blank 3 |
Applesauce | fill in the blank 4 |
Total | $fill in the blank 5 |
2. Allocate the joint cost to the four grades of apples by finding the average joint cost per pound and multiplying it by the number of pounds in the grade. Round the average cost answer to the nearest cent.
Average cost = $fill in the blank 6 per pound.
Joint Cost | ||
Grades | Allocation | |
Grade A | $fill in the blank 7 | |
Grade B | $fill in the blank 8 | |
Slices | $fill in the blank 9 | |
Applesauce | $fill in the blank 10 |
3. What if there were 2,000 pounds of Grade A apples and 4,600 pounds of Grade B? How would that affect the allocation of cost to these two grades? How would it affect the allocation of cost to the remaining common grades?
Joint Cost | |
Grades | Allocation |
Grade A | $fill in the blank 11 |
Grade B | $fill in the blank 12 |
Slices | $fill in the blank 13 |
Applesauce | $fill in the blank 14 |
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