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. GEORGIA ORCHARDS Income Statement For Year Ended December 31, 2015 No. 1 No. 2 No. 3 Combined Sales (by grade) $525,000 No. 1: 350,000 lbs. $1.50/lb No. 2: 350,000 lbs.$0.90/lb No. 3: 600,000 lbs. $0.35/lb Total sales 315,000 $ 210,000 $1,050,000 Costs Tree pruning and care$0.30/lb Picking, sorting, and grading $0.20/lb Delivery costs 105,000 70,000 15,300 05,000 70,000 180,000 120,000 37,800 390,000 260,000 68,400 15,300 Total costs 190,300 190,300 337,800 718,400 Net income (loss) $334,700 124,700 S(127,800) 331,600 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 $30,600 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

Explanation / Answer

TREE PRUNNING AND CARE GRADE ALLOCATION BASE PERCENT OF ALLOCATION BASE * INDIRECT COST ALLOCATED COST NUM. DEN. % OF TOTAL Grade-1 350000 350000 1300000 26.92% 390000 104988 Grade-2 350000 350000 1300000 26.92% 390000 104988 Grade-3 600000 600000 1300000 46.16% 390000 180024 1300000 1300000 390000 PICKING SORTING AND GRADING GRADE ALLOCATION BASE PERCENT OF ALLOCATION BASE * INDIRECT COST ALLOCATED COST NUM. DEN. % OF TOTAL Grade-1 350000 350000 1300000 26.92% 260000 69992 Grade-2 350000 350000 1300000 26.92% 260000 69992 Grade-3 600000 600000 1300000 46.16% 260000 120016 1300000 1300000 260000 DELIVERY GRADE ALLOCATION BASE PERCENT OF ALLOCATION BASE * INDIRECT COST ALLOCATED COST NUM. DEN. % OF TOTAL Grade-1 350000 350000 700000 50.00% 30600 15300 Grade-2 350000 350000 700000 50.00% 30600 15300 TOTAL 700000 700000 30600 Grade-3 600000 600000 600000 100.00% 37800 37800 1300000 1300000 68400 Req 2: INCOME STATEMENT GRADE1 GRADE2 GRADE3 TOTAL Sales revenue 525000 315000 210000 1050000 Less: Cost: Tree pruning and Care 104988 104988 180024 390000 Picking, Sorting and Grading 69992 69992 120016 260000 Delivery 15300 15300 37800 68400 Total Cost 190280 190280 337840 718400 Net Income 334720 124720 -127840 331600

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