BEX.07.08

Chapter 7 BEX

book Piller Alocating Joint Costs Using the weighted Average Method Sunny Lane, Inc., purchases peaches from local orchards and sorts them into four categories. Grade A are large blemish-free peaches that can be sold to gourmet fruit sellers. Grade B peaches are smaler and may be slightly out of proportion. These are packed in boxes and sold to grocery stores. Peaches to be sliced for canned peaches are even smaller than Grade B peaches and have blemishes. Peaches to be pureed for use in sauces are of lower grade than peaches for slices, yet still food grade for canning, Information on a recent purchase of 20,000 pounds of peaches is as follows: Assume that Sunny Lanc, Inc., uses the weighted average method of joint cost allocation and has assigned the following weights to the tour grades of poaches: Grades Pounds Weight Factor 3.0 Grade A 1,500 5,000 Grade 2.0 Slips 8,000 0.5 Pureed 5,500 1.0 Total 20,000 Total joint cost is $18,000. Required: 1. Allocate the joint cost to the four grades of peaches 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 3,375 Grada 7,500 Slices 3,000 X Pureed 4,125 x Total $ 18,000 (Note: The Joint cast allocation does not equal $18,00n due to rounding. 2. What if the factory found that Grade A peaches were being valued less by customers and decided to decrease the weight factor for Grade A peeches to 2.0? How would that affect the allocation of cost to Grade Apeaches? 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 7,500X Grada B 8,000 x Slices 3,200 Pureed 4,400 Total 18,000 (Note. The joint cost allocation does not equal $18,000 due to rounding