Question
Georgia Orchards produced a good crop of peaches this year. After preparing the following income statement, the company is concerned about the net loss on
Georgia Orchards produced a good crop of peaches this year. After preparing the following income statement, the company is concerned about the net loss on its No. 3 peaches.
GEORGIA ORCHARDS
Income Statement
For Year Ended December 31, 2017No. 1No. 2No. 3CombinedSales (by grade)No. 1: 204,000 Ibs. @ $2.20/lb$448,800No. 2: 204,000 Ibs. @ $1.80/lb$367,200No. 3: 1,360,000 Ibs. @ $0.15/lb$204,000Total sales$1,020,000CostsTree pruning and care @ $0.35/Ib71,40071,400476,000618,800Picking, sorting, and grading @ $0.10/Ib20,40020,400136,000176,800Delivery costs15,40015,40037,90068,700Total costs107,200107,200649,900864,300Net income (loss)$341,600$260,000$(445,900)$155,700
In preparing this statement, the company allocated joint costs among the grades on a physical basis as an equal amount per pound. The company's delivery cost records show that $30,800 of the $68,700 relates to crating the No. 1 and No. 2 peaches and hauling them to the buyer. The remaining $37,900 of delivery costs is for crating the No. 3 peaches and hauling them to the cannery.
2. Using your answers to part 1, income statement using the joint costs allocated on a sales value basis. (Do not round intermediate calculations.)
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