Georgia Orchards produced a good crop of peaches this year. After preparing the

Question

Georgia Orchards produced a good crop of peaches this year. After preparing the following income statement, the company believes it should have given its No. 3 peaches to charity and saved its efforts.

  

  

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 $68,800 relates to crating the No. 1 and No. 2 peaches and hauling them to the buyer. The remaining $38,000 of delivery costs is for crating the No. 3 peaches and hauling them to the cannery.

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.)

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.)

      

Georgia Orchards produced a good crop of peaches this year. After preparing the following income statement, the company believes it should have given its No. 3 peaches to charity and saved its efforts.

Explanation / Answer

Prepare reports showing cost allocations on a sales value basis

Working Note

Allocation of balance delivery cost ie 68800-(38000 delivery cost of No4 given) = 30800 to No1 And 2

income statement using the joint costs allocated on a sales value basis.

No 1 No 2 No 3 Combined Sales 445500 346500 198000 990000 Percentage of sales to total 45.00% 35.00% 20.00% 100.00% Cost Tree pruning and care 594000 267300 207900 118800 594000 Picking, sorting, and grading 148500 66825 51975 29700 148500 Delivery costs 68800 17325 13475 38000 68800

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