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Refer to Cornerstone Exercise 7.7. Assume that Orchard Fresh, Inc., uses the weighted average method of joint cost allocation and has assigned the following weights to the four grades of apples: Total joint cost is $18,000. Required: 1. Allocate the joint cost to the four grades of apples using the weighted average method. (Carry out the percent calculations to four significant digits. Round all cost allocations to the nearest dollar.) 2. What if the factory found that Grade A apples were being valued less by customers and decided to decrease the weight factor for Grade A apples to 3.0? How would that affect the allocation of cost to Grade A apples? How would it affect the allocation of cost to the remaining grades?

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Cornerstones of Cost Management (C...

4th Edition
Don R. Hansen + 1 other
Publisher: Cengage Learning
ISBN: 9781305970663

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Chapter
Section
BuyFindarrow_forward

Cornerstones of Cost Management (C...

4th Edition
Don R. Hansen + 1 other
Publisher: Cengage Learning
ISBN: 9781305970663
Chapter 7, Problem 8CE
Textbook Problem
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Refer to Cornerstone Exercise 7.7. Assume that Orchard Fresh, Inc., uses the weighted average method of joint cost allocation and has assigned the following weights to the four grades of apples:

Chapter 7, Problem 8CE, Refer to Cornerstone Exercise 7.7. Assume that Orchard Fresh, Inc., uses the weighted average method

Total joint cost is $18,000.

Required:

  1. 1. Allocate the joint cost to the four grades of apples using the weighted average method. (Carry out the percent calculations to four significant digits. Round all cost allocations to the nearest dollar.)
  2. 2. What if the factory found that Grade A apples were being valued less by customers and decided to decrease the weight factor for Grade A apples to 3.0? How would that affect the allocation of cost to Grade A apples? How would it affect the allocation of cost to the remaining grades?

1.

To determine

Allocate the joint costs to the four grades of apples using the weighted average method.

Explanation of Solution

Joint cost: The total cost incurred to produce or manufacture or process, more than two products at the same time, is referred to as joint cost.

Allocate the joint costs:

Grades

Number of Pounds

(a)

Weight Factor

(b)

Weighted Number of Pounds

(c=a×b)

Percent

(d)

Allocated Joint Cost

[(d)×$18,000]

Grade A1,60046,400(1)0.2362$4,252
Grade B5,000210,000(1)0.369$6,642
Slices8,00018,000(1)0

2.

To determine

Explain the situation if the factory found that Grade A apples are being valued less by customers and decided to decrease the weight factor for Grade A apples to 3.0, explain the manner in which it affects the allocation of cost to Grade A apples and explain the manner in which it affects the allocation of cost to the remaining grades.

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Chapter 7 Solutions

Cornerstones of Cost Management (Cornerstones Series)
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