Question
In: Accounting
Allocating Joint Costs Using the Sales-Value-at-Split-Off Method Orchard Fresh, Inc., purchases apples from local orchards and...
Allocating Joint Costs Using the Sales-Value-at-Split-Off Method
Orchard Fresh, Inc., purchases apples from local orchards and sorts them into four categories. Grade A are large blemish-free apples that can be sold to gourmet fruit sellers. Grade B apples are smaller and may be slightly out of proportion. These are packed in boxes and sold to grocery stores. Apples for slices are even smaller than Grade B apples and have blemishes. Apples for applesauce are of lower grade than apples for slices, yet still suitable for canning.
Information on a recent purchase of 20,000 pounds of apples is as follows: Assume that Orchard Fresh, Inc., uses the sales-value-at-split-off method of joint cost allocation and has provided the following information about the four grades of apples:
| Grades | Pounds | Price at Split-Off (per lb.) |
| Grade A | 1,600 | $4.00 |
| Grade B | 5,000 | 1.00 |
| Slices | 8,000 | 0.50 |
| Applesauce | 5,400 | 0.10 |
| Total | 20,000 |
Total joint cost is $15,000.
Required:
1. Allocate the joint cost to the four grades of apples using the sales-value-at-split-off method. Round your allocation percentages to four decimal places and round the allocated costs to the nearest dollar.
| Joint Cost | |
| Grades | Allocation |
| Grade A | $___________ |
| Grade B | $___________ |
| Slices | $___________ |
| Applesauce | $___________ |
| Total | $___________ |
2. What if the price at split-off of Grade B apples increased to $1.20 per pound? How would that affect the allocation of cost to Grade B apples? How would it affect the allocation of cost to the remaining grades? Round your allocation percentages to four decimal places and round the allocated costs to the nearest dollar.
| Joint Cost | |
| Grades | Allocation |
| Grade A | $___________ |
| Grade B | $___________ |
| Slices | $___________ |
| Applesauce | $___________ |
| Total | $___________ |
Solutions
Expert Solution
| Part-1 = Comutation of Joint Cost per Pound ( As per Sale Value at Split Off Point ) | ||||||||
| Product Produced |
Unit in Pound (a) |
SP/Pound (b) |
Sales Value at Split Off
Point (c=aXb) |
Allocation percentage (d=(c/15940) |
Joint Cost (e ) |
Joint cost Allocated (f=d*e) |
||
| Grade-A | 1600 | $4.00 | $6,400.00 | 40.1506% | 15000 | $6,023 | ||
| Grade B | 5000 | $1.00 | $5,000.00 | 31.3676% | 15000 | $4,705 | ||
| Slice | 8000 | $0.50 | $4,000.00 | 25.0941% | 15000 | $3,764 | ||
| Applesauce | 5400 | $0.10 | $540.00 | 3.3877% | 15000 | $508 | ||
| total | 20000 | 15940 | $15,000.00 | |||||
| Part-1 = Comutation of Joint Cost per Pound ( As per Sale Value at Split Off Point ) | ||||||||
| Product Produced |
Unit in Pound (a) |
SP/Pound (b) |
Sales Value at Split Off
Point (c=aXb) |
Allocation percentage (d=(c/15940) |
Joint Cost (e ) |
Joint cost Allocated (f=d*e) |
||
| Grade-A | 1600 | $4.00 | $6,400.00 | 37.7804% | 15000 | $5,667 | ||
| Grade B | 5000 | $1.20 | $6,000.00 | 35.4191% | 15000 | $5,313 | ||
| Slice | 8000 | $0.50 | $4,000.00 | 23.6128% | 15000 | $3,542 | ||
| Applesauce | 5400 | $0.10 | $540.00 | 3.1877% | 15000 | $478 | ||
| total | 20000 | 16940 | $15,000.00 |
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sorts them into four categories. Grade A are large blemish-free
apples that can be sold to gourmet fruit sellers. Grade B apples
are smaller and may be slightly out of proportion. These are packed
in boxes and sold to grocery stores. Apples for slices are even
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purchases apples from local orchards and sorts them into four
categories. Grade A are large blemish-free apples that can be sold
to gourmet fruit sellers. Grade B apples are smaller and may be
slightly out of proportion. These are packed in boxes and sold to
grocery stores. Apples for slices are even smaller than Grade B
apples and have blemishes. Apples for applesauce are of lower grade
than apples...
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sorts them into four categories. Grade A are large blemish-free
apples that can be sold to gourmet fruit sellers. Grade B apples
are smaller and may be slightly out of proportion. These are packed
in boxes and sold to grocery stores. Apples for slices are even
smaller than Grade B apples and have blemishes. Apples for
applesauce are of lower grade than apples...
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apples that can be sold to gourmet fruit sellers. Grade B apples
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in boxes and sold to grocery stores. Apples for slices are even
smaller than Grade B apples and have blemishes. Apples for
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