
Introduction When a cost in incurred in a joint process, it is termed as joint cost. Normally, there are some products used in joint process which require single input and in return produce multiple outputs. These products can be termed as joint products.
- Cost allocations on a sales value basis to the three grades of tomatoes.
- Income statement using joint costs allocated on a sales value basis
- To analyze whether delivery costs fit the definition of a joint cost.

Answer to Problem 5BPSB
Solution
1.
Allocation of Costs | ||||||
Particulars | No.1 | No.2 | No.3 | Combined | Note | |
| | | | | | |
Sales | 900000 | 500000 | 40000 | 1440000 | | |
Sales in percentage | 62% | 35% | 3% | 100% | (a) | |
| | |||||
Costs: | | | | | | |
Land preparation, seeding & cultivation | 434000 | 245000 | 21000 | 700000 | (b) | |
Harvesting, sorting and grading | 24800 | 14000 | 1200 | 40000 | © | |
Delivery costs | 10866 | 6134 | 3000 | 20000 | (d) |
2. The income statement is as follows:
Particulars | Allocation of Costs | |||
No.1 | No.2 | No.3 | Combined | |
| | | | |
Sales(A) | 900000 | 500000 | 40000 | 1440000 |
Sales in percentage | 62% | 35% | 3% | 100% |
| | | | |
Less Costs: | | | | |
Land preparation, seeding & cultivation | 434000 | 245000 | 21000 | 700000 |
Harvesting, sorting and grading | 24800 | 14000 | 1200 | 40000 |
Delivery costs | 10866 | 6134 | 3000 | 20000 |
Total costs (B) | 469666 | 265134 | 25200 | 760000 |
| | | | |
Net Income (A-B) | 430334 | 234866 | 14800 | 680000 |
3. Yes. Definitely delivery costs fit the definition of a joint cost as the No.1 & 2 grades of tomatoes are allocated delivery costs which are incurred on transporting them to the buyer as their destination is the same. No.3 graded tomatoes delivery costs are directly linked with the produce going to the cannery.
Explanation of Solution
1. A cost object can be referred to any item or any activity. The process of assigning costs to cost objects is known as cost allocation.
Therefore, allocation of cost on departmental sales can be computed on the percentage of contribution of each department to the total revenue earned by Sales.
Calculation of cost allocated based on sales | ||||||||
Note | Particulars | Formula | Allocation of Costs
| |||||
(a) | Sales in percentage | |||||||
(b) | Land preparation, seeding & cultivation | |||||||
© | Harvesting, sorting and grading | |||||||
(d) | Delivery costs | 3000 |
Note:
i) The total of sales percentage taken is 97% instead of 100% as for No.3 the delivery cost has already been allocated.
ii) It has been given that the delivery cost to be directly allocated to No.3 is 3000$. So, the balance of $17000 ($20000-$3000) has to be allocated to No. 1 & No. 2 tomatoes based on their sales percentages.
2. Income statement shows the financial position of a business firm in a given period. Being one of the final accounts statements, it represents the revenue earned and expenses incurred for a given period. The excess of revenue over expenses is the net income and on the other hand the shortage of revenue when compared to expenses incurred is termed as net loss. The business may incur profit or loss at some point or the other.
3. Yes. Definitely delivery costs fits the definition of a joint cost as the No.1 & 2 grades of tomatoes are allocated delivery costs which are incurred on transporting them to the buyer as their destination is the same. The No.3 graded tomatoes delivery costs are directly linked with the produce going to the cannery.
Want to see more full solutions like this?
Chapter 24 Solutions
Fundamental Accounting Principles -Hardcover
- Quick answer of this accounting questionsarrow_forwardPlease give me answer general accounting questionarrow_forwardrespond to ceasar Companies make adjusting entries to ensure that their financial statements accurately reflect the true financial position and performance during a specific accounting period. These entries are necessary to account for revenues earned and expenses incurred that may not yet have been recorded in the books. Adjusting entries are typically made at the end of an accounting period, during the preparation of financial statements, as part of the accounting cycle. This step is crucial in aligning the company’s books with the accrual basis of accounting, where revenues and expenses are recognized when they are earned or incurred, rather than when cash is received or paid. By making these adjustments, companies can provide accurate and reliable financial information to stakeholders.arrow_forward
- According to the accrual method of accounting, businesses make adjusting entries to ensure that their financial statements are correctly depicting their financial situation and performance. No matter when cash transactions take place, adjusting entries are required to record revenues when they are generated and expenses when they are incurred (Weygandt et al., 2022). In order to guarantee that financial statements present an accurate and impartial picture of their company's financial health, these entries help in bringing financial records into compliance with the revenue recognition and matching standards. In order to account for things like accumulated revenues, accrued expenses, depreciation, and prepaid expenses, adjusting entries are usually made at the conclusion of an accounting period prior to the preparation of financial statements (Kieso et al., 2020). By implementing these changes, businesses avoid making false representations in their financial reports, which enables…arrow_forwardRequired information Skip to question [The following information applies to the questions displayed below.]Brianna's Boutique has the following transactions related to its top-selling Gucci purse for the month of October. Brianna's Boutique uses a periodic inventory system. Date Transactions Units Unit Cost Total Cost October 1 Beginning inventory 6 $830 $4,980 October 4 Sale 4 October 10 Purchase 5 840 4,200 October 13 Sale 3 October 20 Purchase 4 850 3,400 October 28 Sale 7 October 30 Purchase 6 860 5,160 $17,740 2. Using FIFO, calculate ending inventory and cost of goods sold at October 31.arrow_forwardWhy do companies make adjusting entries? When are adjusting entries made and at what point in the accounting process?arrow_forward
- AccountingAccountingISBN:9781337272094Author:WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.Publisher:Cengage Learning,Accounting Information SystemsAccountingISBN:9781337619202Author:Hall, James A.Publisher:Cengage Learning,
- Horngren's Cost Accounting: A Managerial Emphasis...AccountingISBN:9780134475585Author:Srikant M. Datar, Madhav V. RajanPublisher:PEARSONIntermediate AccountingAccountingISBN:9781259722660Author:J. David Spiceland, Mark W. Nelson, Wayne M ThomasPublisher:McGraw-Hill EducationFinancial and Managerial AccountingAccountingISBN:9781259726705Author:John J Wild, Ken W. Shaw, Barbara Chiappetta Fundamental Accounting PrinciplesPublisher:McGraw-Hill Education





