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

Question

Georgia Orchards produced a good crop of peaches this yeor. 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. No. 2 No. 3 Combined Sales (by grade) $ 491.400 No. 1: 234,000 lbs. $2.10lb No. 2: 234.000 lbs. $1.90/lb No. 3: 936,000 lbs. @$0.25Mb Total sales $444,600 $ 234,000 $1,170,000 Costs Tree pruning and core $0.30/lb Picking, sorting, and grading $0.20/b Delivery costs 70,200 46,800 7000 70,200 46,800 7,000 280,800 187,200 39,500 421,200 280,800 73,500 Total costs 134,000 134,000 507,500 775,500 Net income (oss) $ 357,400 310,600 $ (273,500) $394,500 In preporing 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 $34,000 of the $73,500 relates to crating the No. 1 and No. 2 peaches and hauling them to the buyer. The remaining $39,500 of delivery costs is for crating the No. 3 peaches and hauling them to the cannery.

Explanation / Answer

Tree Pruning and Care Allocation Percent f Allocation * Indirect Cost Allocated Cost Base Numerator Denominator % of Total Department Grade No-1 234000 234000 1404000 17% 421200 70200 Grade No. 2 234000 234000 1404000 17% 421200 70200 Grade No 3 936000 936000 1404000 67% 421200 280800 Total 1404000 1404000 1404000 100% 421200 Picking Sorting Grading Allocation Percent f Allocation * Indirect Cost Allocated Cost Base Numerator Denominator % of Total Department Grade No-1 234000 234000 1404000 17% 280800 46800 Grade No. 2 234000 234000 1404000 17% 280800 46800 Grade No 3 936000 936000 1404000 67% 280800 187200 Total 1404000 1404000 1404000 100% 280800 Delivery cost Allocation Percent f Allocation * Indirect Cost Allocated Cost Base Numerator Denominator % of Total Department Grade No-1 234000 234000 468000 50% 34000 17000 Grade No. 2 234000 234000 468000 50% 34000 17000 Total 468000 468000 34000 Grade No 3 936000 936000 936000 100% 39500 39500 Total 1404000 1404000 1404000 100% 73500 INCOME STATEMENT GRADE-1 GRADE-2 GRADDE-3 Total Sales revenue 491400 444600 234000 1170000 Cost Tree Pruning and care 70200 70200 280800 421200 Picking, Sorting and Grading 46800 46800 187200 280800 Delivery cost 17000 17000 39500 73500 Total Cost 134000 134000 507500 775500 Net Income 357400 310600 -273500 394500

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