Georgia Orchards produced a good crop of peaches this year. After preparing the following income statement,...

Georgia Orchards produced a good crop of peaches this year. After preparing the following income statement, the company is concerned about the net loss on its No. 3 peaches.

GEORGIA ORCHARDS Income Statement For Year Ended December 31, 2019
	No. 1		No. 2		No. 3			Combined
Sales (by grade)
No. 1: 400,000 Ibs. @ $1.20/lb	$	480,000
No. 2: 400,000 Ibs. @ $0.80/lb			$	320,000
No. 3: 800,000 Ibs. @ $0.25/lb					$	200,000
Total sales								$	1,000,000
Costs
Tree pruning and care @ $0.25/lb		100,000		100,000		200,000			400,000
Picking, sorting, and grading @ $0.20/lb		80,000		80,000		160,000			320,000
Delivery costs		15,600		15,600		38,100			69,300
Total costs		195,600		195,600		398,100			789,300
Net income (loss)	$	284,400	$	124,400	$	(198,100	)	$	210,700

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 $31,200 of the $69,300 relates to crating the No. 1 and No. 2 peaches and hauling them to the buyer. The remaining $38,100 of delivery costs is for crating the No. 3 peaches and hauling them to the cannery.

Problem 09-5AC Part 1

Required:
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.)

Expert Solution

Solution:

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