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Allocating Joint Costs Using the Physical Units Method

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 25,000 pounds of apples is as follows:

Grades	Pounds
Grade A	2,000
Grade B	5,000
Slices	10,000
Applesauce	8,000
Total	25,000

Total joint cost is $21,250.

Required:

1. Allocate the joint cost to the four grades of apples using the physical units method.

	Joint Cost
Grades	Allocation
Grade A	$fill in the blank 1
Grade B	fill in the blank 2
Slices	fill in the blank 3
Applesauce	fill in the blank 4
Total	$fill in the blank 5

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 = $fill in the blank 6 per pound.

	Joint Cost
Grades	Allocation
Grade A	$fill in the blank 7
Grade B	$fill in the blank 8
Slices	$fill in the blank 9
Applesauce	$fill in the blank 10

3. What if there were 2,500 pounds of Grade A apples and 4,500 pounds of Grade B? How would that affect the allocation of cost to these two grades? How would it affect the allocation of cost to the remaining common grades?

	Joint Cost
Grades	Allocation
Grade A	$fill in the blank 11
Grade B	$fill in the blank 12
Slices	$fill in the blank 13
Applesauce	$fill in the blank 14