Allocating Joint Costs Using the Sales-Value-at-Split-Off Method

Sunny Lane, Inc., purchases peaches from local orchards and sorts them into four categories. Grade A are large blemish-free peaches that can be sold to gourmet fruit sellers. Grade B peaches are smaller and may be slightly out of proportion. These are packed in boxes and sold to grocery stores. Peaches to be sliced for canned peaches are even smaller than Grade B peaches and have blemishes. Peaches to be pureed for use in sauces are of lower grade than peaches for slices, yet still food grade for canning.

Information on a recent purchase of 20,000 pounds of peaches is as follows: Assume that Sunny Lane, Inc., uses the sales-value-at-split-off method of joint cost allocation and has provided the following information about the four grades of peaches:

Grades	Pounds	Price at Split-Off (per lb.)
Grade A	1,400	$6.00
Grade B	5,000	2.00
Slices	8,000	1.30
Pureed	5,600	0.80
Total	20,000

Total joint cost is $16,000.

What if the price at split-off of Grade B peaches increased to $1.60 per pound? How would that affect the allocation of cost to Grade B peaches? How would it affect the allocation of cost to the remaining grades? Round your allocation percentages to four decimal places and round the allocated costs to the nearest dollar.

Grades Grade A Grade B Slices Pureed Total SA LA Joint Cost Allocation 4,297 X 4,091 X 5,320 2,292 X 16,000