[1] f Cezto.mheducation.com/hm.tpx Problem 24-4AB Allocation of Joint costs LO C

Question

[1] f Cezto.mheducation.com/hm.tpx Problem 24-4AB Allocation of Joint costs LO C3 The following Information applies to the questions displayed below Georgla Orchards produced a good crop of peaches this year. Ater preparing the following incomse year. After t given its No. 3 peaches to charity and saved its efforts statement, the company believes it should have Income Statement For Year Ended December 31, 2013 No. Sales (by grade) $525,000 No. 1: 350,000 lbs. No. 2: 350,000 bs. No. 3: 600,000 bs Total sales $1.50Mb $0.90 so.35 $315,000 s 210.000$1050,000 s 210,000 $1,050,00o Costs care @so.'$0.20ND 390,000 260,000 68.400 105,000 Tree pruning and care $0.30/lb Picking, sorting, and grading @$0.201b Delvery costs 105,000 70,000 20,000 37,800 337 70,000 15.300 190.300 $334,700 $124,700 127,800) '15.300 15,300 70,000180,000 15,300 Total costs 190,300 37,800 718.400 $331600 5 331,600 Net income (loss 331,600 In preparing this statement, the company alocated joint costs among the grades on a physical basis as an equal amount per pound. The company's delivery cost records show that $30,600 of the $68,400 relates to crating the No. 1 and No. 2 peaches and hauling them to the buyer. The remaining $37,800 of delivery costs is for crating the No. 3 peaches and hauling them to the cannery Section Break Probiem 24-4AB Aocation of joint costs Lo 3

Explanation / Answer

You have not posted part 1 but according to your part 2, part 1 must have asked to allocate joint cost on a sale value basis except for delivery cost since for delivery cost specific allocation of cost is given

Allocation of joint cost on sale value basis

Tree pruning and care - total cost = $390000

Peach no 1 = $390000 * 525000/1050000 = $195000

Peach no 2 = $390000 * 315000/1050000 = $117000

Peach no 3 = $390000 * 210000/1050000 = $78000

Picking, sorting and grading = $260000

Peach no 1 = $260000 * 525000/1050000 = $130000

Peach no 2 = $260000 * 315000/1050000 = $78000

Peach no 3 = $260000 * 210000/1050000 = $52000

Income statement using joint cost allocated on sale value basis

In the question it is given that delivery cost out of $68400, $30600 is for crating peach 1 & 2, now these joint cost we have allocated equally since no of lbs is same and therefore delivery cost of the peaches might be same alternatively we could have assumed that these joint cost of $30600 will be allocated among peach 1 & 2 on sale value basis as follows:

Peach 1 = $30600*525000/(525000+315000) = $19125

Peach 2 = $30600*315000/840000 = $11475

Peach 3 would remain same I.e. $37800

Georgia orchards Income statement For the year ended December 31, 2013 No 1 No 2 No 3 Combined Sales 525000 315000 210000 1050000 Costs Tree pruning and care 195000 117000 78000 390000 Picking, sorting and grading 130000 78000 52000 260000 Delivery cost (as per records) 15300 15300 37800 68400 Total costs 340300 210300 167800 718400 Net income (loss) 184700 104700 42200 331600

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