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Refer to Cornerstone Exercise 7.7. Assume that Orchard Fresh. Inc., uses the sales-value-at-split-off method of joint cost allocation and has provided the following information about 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 sales-value-at-split-off method. (Carry out the percent calculations to four significant digits. Round all cost allocations to the nearest dollar.) 2. What if the price at split-off of Grade B apples increased to $1.20 per pound? How would that affect the allocation of cost to Grade B 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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Section
BuyFindarrow_forward

Cornerstones of Cost Management (C...

4th Edition
Don R. Hansen + 1 other
Publisher: Cengage Learning
ISBN: 9781305970663
Chapter 7, Problem 9CE
Textbook Problem
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Refer to Cornerstone Exercise 7.7. Assume that Orchard Fresh. Inc., uses the sales-value-at-split-off method of joint cost allocation and has provided the following information about the four grades of apples:

Chapter 7, Problem 9CE, Refer to Cornerstone Exercise 7.7. Assume that Orchard Fresh. Inc., uses the

Total joint cost is $18,000.

Required:

  1. 1. Allocate the joint cost to the four grades of apples using the sales-value-at-split-off method. (Carry out the percent calculations to four significant digits. Round all cost allocations to the nearest dollar.)
  2. 2. What if the price at split-off of Grade B apples increased to $1.20 per pound? How would that affect the allocation of cost to Grade B apples? How would it affect the allocation of cost to the remaining grades?

1.

To determine

Allocate joint costs to the four grades of apples using the sales-value-at-split-off 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 joint costs:

Grades

Pounds produced

(a)

Price at Split-Off (per pound)

(b)

Total Market Value at Split-Off

(c=a×b)

Percent of Total Market Value

(d)

Allocated Joint Cost

[(d)×$18,000]

Grade A 1,600$4.00 $6,400 (1)0.4015$7,227
Grade B5,000$1$5,000(1)0.3137$5,647
Slices 8,000$0

2.

To determine

State the impact of the price at split-off of grade B apple increases to $1.20 per pound, explain the manner in which it affects the allocation of cost to grade B 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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