# 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?

### Cornerstones of Cost Management (C...

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

Chapter
Section

### 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: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?

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 B 5,000 $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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