Chapter 7 BEX

Allocating Joint Costs Using the Physical Units Method Sunny Lane, Inc., purchases peaches from local orchards and sorts them into four categories. Grade A are large blemish-fron peaches that can be sold to gourmet fruit sellers. Crade B peaches are smaller and may be slightly out of proportion. These are packed in boxes and sold 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 or lower grade than peaches for slices, yet still food grade for canning, Information on a recent purchase of 20,000 po peaches is as follows Grades Pounds Grade A 1,500 5.000 Grade B Slices 8,000 Pureed 5,500 20,000 Total Total joint cost is $18,000. Required: 1. Allocate the joint cost to the four grades of peaches using the physical units method. Joint Cost Grades Allocation $ Grade A 1,350.00 Grade B 4,500.00 7,200.00 Slices Pureed 4,950.00 Total 18,000.0 2. Allocate the joint cost to the four gredes of peaches 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- 0.90 per pound Joint Cost Grades Allocation Grade A $ 1,3507 Grade B $ 4,500 Slices $ 7,200.00 Purend $ 4,950.00 3. What if there were 2,000 pounds of Grade A peaches and 4,500 pounds of Grade 7 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 3. What if there were 2,000 pounds of Grade A peaches and 4,500 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 1,800.00 Grade B 4,050 x Slices $ 7,200 Pureed 4,950