Question

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 21,000 pounds of apples is as follows: Grades Pounds Grade A 1,890 Grade B 5,250 Slices 8,400 Applesauce 5,460 Total 21,000 Total joint cost is $17,850. Required: 1. Allocate the joint cost to the four grades of apples using the physical units method. Joint Cost Grades Allocation Grade A $ Grade B Slices Applesauce Total $ 2. Allocate the joint cost to the four grades of apples by finding the average joint cost per pound and multiplying it by the number of pounds in the grade. Round the average cost answer to the nearest cent. Average cost

Answer 1

Answer and Explanation:

According to the scenario, computation of the given data are as follow:-

1. Allocate the joint cost by using the physical unit method

Particular  Allocation of physical unit Allocated joint cost ($)

Grade A         $17,850 × 1,890 ÷ 21,000 1606.5

Grade B         $17,850 × 5,250 ÷ 21,000 4462.5

Slices         $17,850 × 8,400 ÷ 21,000 7,140

Applesauce $17,850 × 5,460 ÷ 21,000 4,641

Total                                                  17,850

Allocated Joint Cost = Total Joint Cost × Pounds Grades ÷ Total Pounds Grades  

2. Allocate the joint cost by using multiplying method:-

Average Joint Cost Per Pound is

= Total Joint Cost ÷ Total Pounds Grades

= $17,850 ÷ 21,000

= 0.85

Allocated joint cost = Average Joint Cost Per Pound ×  Pounds Grades

Particular  Allocation of average cost Allocated joint cost

Grade A            0.85 × 1,890                          1606.5

Grade B            0.85 × 5,250                          4462.5

Slices            0.85 × 8,400                          7,140

Applesauce    0.85  × 5,460                         4,641

Total                                                           17,850