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 $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.

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

Tree Pruning and Care: An income statement using the joint costs allocated on a sales value basis Grade Allocation Base Percent of Allocation base x Indirect Cost Allocated Cost GEORGIA ORCHARDS Nos. Numerator Denominator % of Total Income Statement No.1 Sales Value $491,400 $1,170,000 42.00% $421,200 $176,904 For the Year ended December 31,2015 No.2 Sales Value $444,600 $1,170,000 38.00% $421,200 $160,056 No.1 No.2 No.3 Combined No.3 Sales Value $234,000 $1,170,000 20.00% $421,200 $84,240 Sales $491,400 $444,600 $234,000 $1,170,000 Totals $421,200 Less : Costs - Tree pruning and care $176,904 $160,056 $84,240 $421,200 Picking ,Sorting and Grading - Picking, sorting, and grading $117,936 $106,704 $56,160 $280,800 Grade Allocation Base Percent of Allocation base x Indirect Cost Allocated Cost - Delivery Cost $17,850 $16,150 $39,500 $73,500 Nos. Numerator Denominator % of Total Total Costs $312,690 $282,910 $179,900 $775,500 No.1 Sales Value $491,400 $1,170,000 42.00% $280,800 $117,936 Net Income (Loss) $178,710 $161,690 $54,100 $394,500 No.2 Sales Value $444,600 $1,170,000 38.00% $280,800 $106,704 No.3 Sales Value $234,000 $1,170,000 20.00% $280,800 $56,160 Totals $280,800 Delivery Grade Allocation Base Percent of Allocation base x Indirect Cost Allocated Cost Nos. Numerator Denominator % of Total No.1 Sales Value $491,400 $936,000 52.50% $34,000 $17,850 No.2 Sales Value $444,600 $936,000 47.50% $34,000 $16,150 No.3 Sales Value $234,000 $234,000 100.00% $39,500 $39,500 Totals $73,500

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