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, 2017 | |||||||||||||
No. 1 | No. 2 | No. 3 | Combined | ||||||||||
Sales (by grade) | |||||||||||||
No. 1: 408,000 Ibs. @ $1.20/lb | $ | 489,600 | |||||||||||
No. 2: 408,000 Ibs. @ $0.80/lb | $ | 326,400 | |||||||||||
No. 3: 680,000 Ibs. @ $0.30/lb | $ | 204,000 | |||||||||||
Total sales | $ | 1,020,000 | |||||||||||
Costs | |||||||||||||
Tree pruning and care @ $0.25/Ib | 102,000 | 102,000 | 170,000 | 374,000 | |||||||||
Picking, sorting, and grading @ $0.20/Ib | 81,600 | 81,600 | 136,000 | 299,200 | |||||||||
Delivery costs | 15,200 | 15,200 | 37,700 | 68,100 | |||||||||
Total costs | 198,800 | 198,800 | 343,700 | 741,300 | |||||||||
Net income (loss) | $ | 290,800 | $ | 127,600 | $ | (139,700 | ) | $ | 278,700 | ||||
In preparing this statement, the company allocated joint costs among the grades on a physical basis as an equal amount per pound. The companys delivery cost records show that $30,400 of the $68,100 relates to crating the No. 1 and No. 2 peaches and hauling them to the buyer. The remaining $37,700 of delivery costs is for crating the No. 3 peaches and hauling them to the cannery.
Problem 24-5AC Part 1
Required: 1. Prepare reports showing cost allocations on a sales value basis to the three grades of peaches. Separate the delivery costs into the amounts directly identifiable with each grade. Then allocate any shared delivery costs on the basis of the relative sales value of each grade. (Do not round intermediate calculations.)
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2. Using your answers to part 1, prepare an income statement using the joint costs allocated on a sales value basis. (Do not round intermediate calculations.)
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