Allocating Joint Costs Using the Physical Units Method Orchard Fresh, Inc., purchases apples from local orchards andsorts them into four categories. Grade A are large blemish-freeapples that can be sold to gourmet fruit sellers. Grade B applesare smaller and may be slightly out of proportion. These are packedin boxes and sold to grocery stores. Apples for slices are evensmaller than Grade B apples and have blemishes. Apples forapplesauce are of lower grade than apples for slices, yet stillsuitable for canning. Information on a recent purchase of 29,000pounds of apples is as follows: | Grades | Pounds | | Grade A | 2,320 | | Grade B | 8,700 | | Slices | 13,050 | | Applesauce | 4,930 | | Total | 29,000 |
Total joint cost is $23,200. Required: 1. Allocate the joint cost to the four gradesof 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 gradesof apples by finding the average joint cost per pound andmultiplying it by the number of pounds in the grade. Round theaverage cost answer to the nearest cent. Average cost = $ per pound. | Joint Cost | | Grades | Allocation | | | Grade A | $ | | | Grade B | $ | | | Slices | $ | | | Applesauce | $ | |
3. What if there were2,900 pounds of Grade A apples and 8,120 pounds of Grade B? Howwould that affect the allocation of cost to these two grades? Howwould it affect the allocation of cost to the remaining commongrades? | Joint Cost | | Grades | Allocation | | | Grade A | $ | | Grade B | $ | | Slices | $ | | Applesauce | $ |
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