Chapter 7 BEX BEX.07.08

Allocating Joint Costs Using the weighted Average Method Sunny Lane, Tne, 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 smaller and may be slightly out of proportion. These are packed in boxes and sold to grocery stores. Pesches to be sliced for canned peaches are even smaller than Grade 8 peaches and have blemishes. Peaches to be purced for use in sauces are of lower grade than pesches 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 Lane, Inc., uses the weighted average method of joint cost allocation and has assigned the following weights to the four grades of peaches : Grades Pounds Weight Factor Grade A A 1,500 3.0 Grada 5.000 2.0 Slices 8,000 0.5 Pureed 5,500 1.0 Total 20,000 Total point 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 dallar. Joint Cost Grades Allocation $ 20,000 Grade A Grade B 20,000 X x 20,000 x Slices Puroad 20,000 Total $ 20,000 x | (Note: The joint cost allocation coes not equal $10,000 due to reunding.) 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 peaches ta 2.07 How would that affect the allocation of cost to Grade A peaches? 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 Grade B Slices Pared Total (Note: The joint cost allocation does not equal $19,000 due to rounding.)