Question

Allocating Joint Costs Using the Weighted Average 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 weighted average method of joint cost allocation and has assigned the following weights to the four grades of apples:

Grades	Pounds	Weight Factor
Grade A	1,800	4.0
Grade B	5,000	2.0
Slices	8,000	1.0
Applesauce	5,200	0.5
Total	20,000

Total joint cost is $19,000.

Required:

1. Allocate the joint cost to the four grades of apples using the weighted average method. Round your allocation percentages to four decimal places and round the allocated costs to the nearest dollar.

	Joint Cost
Grades	Allocation
Grade A	$fill in the blank 1
Grade B	fill in the blank 2
Slices	fill in the blank 3
Applesauce	fill in the blank 4
Total	$fill in the blank 5

(Note: The joint cost allocation does not equal $19,000 due to rounding.)

2. What if the factory found that Grade A apples were being valued less by customers and decided to decrease the weight factor for Grade A apples to 3.0? How would that affect the allocation of cost to Grade A 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	$fill in the blank 6
Grade B	fill in the blank 7
Slices	fill in the blank 8
Applesauce	fill in the blank 9
Total	$fill in the blank 10

(Note: The joint cost allocation does not equal $19,000 due to rounding.)

Answer 1

Requirement 1:

Allocate joint costs using weighted average method :

Apple Grades	Pounds	Weight Factor	Weighted Pounds	Percent	Joint Cost	Joint Cost Allocation
	(a)	(b)	(a) × (b)	(c)	(d)	(c) × (d)
Grade A	1800	4.0	7200	25.8993%	$19,000	$4921
Grade B	5000	2.0	10000	35.9712%	$19,000	$6834
Slices	8000	1.0	8000	28.7770%	$19,000	$5468
Apple Sauce	5200	0.5	2600	9.3525%	$19,000	$1777
Total	20,000		27,800	1.0000		$19,000

Working Note:

Grade A: (7200 ÷ 27800) *100

Grade B: (10,000 ÷ 27800)*100

Slices: (8,000 ÷ 27800)*100

Apple Sauce (2600÷ 27800)*100

Requirement 2:

Allocate joint costs using weighted average method

Apple Grades	Pounds	Weight Factor	Weighted Pounds	Percent	Joint Cost	Joint Cost Allocation
	(a)	(b)	(a) × (b)	(c)	(d)	(c) × (d)
Grade A	1800	3.0	5400	20.7692%	$19000	$3946
Grade B	5000	2.0	10,000	38.4615%	$19000	$7308
Slices	8000	1.0	8,000	30.7692%	$19000	$5846
Apple Sauce	5200	0.5	2600	1.0000%	$19000	$1900
Total	20,000		26000	99.9999%		$19,000