
Concept explainers
Introduction
A cost incurred in a joint process is known as joint cost.
To Determine
1. The cost allocations on a sales value basis to the three grades of peaches.
2. The Income Statement
3. Whether the delivery costs fit the definition of joint cost.

Answer to Problem 5APSA
Solution
1. The cost allocations are as follows:
Tree Pruning and Care | ||||
Grade | Sales Value | Indirect cost | Allocated cost | |
No.1 | 450000 | 405000 | 194400 | |
No.2 | 300000 | 405000 | 129600 | |
No.3 | 187500 | 405000 | 81000 | |
Total | 937500 | | 405000 | |
Picking, Sorting and Grading | ||||
Grade | Sales Value | Indirect cost | Allocated Cost | |
No.1 | 450000 | 405000 | 97200 | |
No.2 | 300000 | 405000 | 64800 | |
No.3 | 187500 | 405000 | 40500 | |
Total | 937500 | | 202500 | |
4DQ | ||||
Grade | Sales Value | Indirect cost | Allocated Cost | |
No.1 | 450000 | 30000 | 18000 | |
No.2 | 300000 | 12000 | ||
No.3 | 187500 | 37500 | 37500 | |
Total | 937500 | 67500 | 67500 |
2. The income statement is shown in the explanation section.
3. Yes, the delivery costs fits the definition of joint cost.
Explanation of Solution
Explanation
1. The calculation of the cost allocations are as follows:
Tree Pruning and Care | ||||
Grade | Sales Value | Percentage of Allocation Base | Indirect cost | Allocated Cost |
No.1 | 450000 | 405000 | ||
No.2 | 300000 | 405000 | ||
No.3 | 187500 | 405000 | ||
Total | 937500 | | | 405000 |
Picking, Sorting and Grading | ||||
Grade | Sales Value | Percentage of Allocation Base | Indirect cost | Allocated Cost |
No.1 | 450000 | 405000 | ||
No.2 | 300000 | 405000 | ||
No.3 | 187500 | 405000 | ||
Total | 937500 | | | 202500 |
Delivery | ||||
Grade | Sales Value | Percentage of Allocation Base | Indirect cost | Allocated Cost |
No.1 | 450000 | 30000 | ||
No.2 | 300000 | 30000 | ||
| 750000 | | | |
No.3 | 187500 | 37500 | ||
Total | 937500 | | | 67500 |
2. The income statement is as follows:
GEORGIA ORCHIDS | ||||
INCOME STATEMENT | ||||
For the Year Ended December 31, 2015 | ||||
Particulars | No.1 | No.2 | No.3 | Combined |
Sales (A) | 450000 | 300000 | 187500 | 937500 |
| ||||
Less Costs | | | | |
Tree pruning and care | 194400 | 129600 | 81000 | 405000 |
Picking, sorting and grading | 97200 | 64800 | 40500 | 202500 |
Delivery costs | 18000 | 12000 | 37500 | 67500 |
Total costs (B) | 309600 | 206400 | 159000 | 675000 |
Net Income (A-B) | 140400 | 93600 | 28500 | 262500 |
3. Yes. The delivery costs fits the definition of a joint cost as the No.1 & 2 grades of peaches are allocated delivery costs which are incurred on transporting them to the buyer as their destination is the same. No. 3 graded peaches delivery costs are directly linked with the produce going to the cannery.
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Chapter 24 Solutions
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