Question

Problem 22-5AB Allocation of joint costs LO C3 [The following information applies to the questions displayed below.] 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. GEORGIA ORCHARDS Income Statement For Year Ended December 31, 2015 No. 1 No. 2 No. 3 Combined $486,000 Sales (by grade) No. 1: 270,000 lbs. @ $1.80/lb No. 2: 270,000 lbs. @ $1.20/1b No. 3: 1,080,000 lbs. @ $0.25/lb Total sales $324,000 $ 270,000 $1,080,000 Costs Tree pruning and care @ $0.20/1b Picking, sorting, and grading @ $0.15/lb Delivery costs 54,000 40,500 16,300 54,000 40,500 16,300 216,000 162,000 38,800 324,000 243,000 71,400 Total costs 110,800 110,800 416,800 638,400 Net income (loss) $375,200 $ 213,200 $ (146,800) $ 441,600 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 $32,600 of the $71,400 relates to crating the No. 1 and No. 2 peaches and hauling them to the buyer. The remaining $38,800 of delivery costs is for crating the No. 3 peaches and hauling them to the cannery.

Answer 1

Solution 1:

Allocation of Tree Pruning and Card - Georgia Orchards
Grade	Allocation Base	Percentage of allocation base			* Indirect Cost	Allocated Cost
		Numerator	Denominator	% of Total
No 1	Sale Value	$486,000.00	$1,080,000.00	45.00%	$324,000.00	$145,800.00
No 2	Sale Value	$324,000.00	$1,080,000.00	30.00%	$324,000.00	$97,200.00
No 3	Sale Value	$270,000.00	$1,080,000.00	25.00%	$324,000.00	$81,000.00
Totals						$324,000.00
Allocation of Picking Sorting and Grading - Georgia Orchards
Grade	Allocation Base	Percentage of allocation base			* Indirect Cost	Allocated Cost
		Numerator	Denominator	% of Total
No 1	Sale Value	$486,000.00	$1,080,000.00	45.00%	$243,000.00	$109,350.00
No 2	Sale Value	$324,000.00	$1,080,000.00	30.00%	$243,000.00	$72,900.00
No 3	Sale Value	$270,000.00	$1,080,000.00	25.00%	$243,000.00	$60,750.00
Totals						$243,000.00
Allocation of Picking Sorting and Grading - Delivery Cost
Grade	Allocation Base	Percentage of allocation base			* Indirect Cost	Allocated Cost
		Numerator	Denominator	% of Total
No 1	Sale Value	$486,000.00	$810,000.00	60.00%	$32,600.00	$19,560.00
No 2	Sale Value	$324,000.00	$810,000.00	40.00%	$32,600.00	$13,040.00
No 3	Direct					$38,800.00
Totals						$71,400.00

Solution 2:

Georgia Orchards
Income Statement
For the year ended December 31, 2015
Particulars	No 1	No 2	No 3	Total
Sales	$486,000.00	$324,000.00	$270,000.00	$1,080,000.00
Costs:
Tree Pruning and Card	$145,800.00	$97,200.00	$81,000.00	$324,000.00
Picking Sorting and Grading	$109,350.00	$72,900.00	$60,750.00	$243,000.00
Delivery Cost	$19,560.00	$13,040.00	$38,800.00	$71,400.00
Total Costs	$274,710.00	$183,140.00	$180,550.00	$638,400.00
Net Income (Loss)	$211,290.00	$140,860.00	$89,450.00	$441,600.00