Allocating Joint CostsUsing the Physical Units Method

Orchard Fresh, Inc.,purchases apples from local orchards and sorts them into fourcategories. Grade A are large blemish-free apples that can be soldto gourmet fruit sellers. Grade B apples are smaller and may beslightly out of proportion. These are packed in boxes and sold togrocery stores. Apples for slices are even smaller than Grade Bapples and have blemishes. Apples for applesauce are of lower gradethan apples for slices, yet still suitable for canning. Informationon a recent purchase of 30,000 pounds of apples is as follows:

Grades	Pounds
Grade A	2,400
Grade B	6,000
Slices	12,000
Applesauce	9,600
Total	30,000

  Totaljoint cost is $25,500.

Required:

1.Allocate the joint cost to the four grades of apples using thephysical units method.

	Joint Cost
Grades	Allocation
Grade A	$
Grade B
Slices
Applesauce
Total	$

2.Allocate the joint cost to the four grades of apples by finding theaverage joint cost per pound and multiplying it by the number ofpounds in the grade. Round the average cost answer to the nearestcent.

Average cost = $ perpound.

	Joint Cost
Grades	Allocation
Grade A	$
Grade B	$
Slices	$
Applesauce	$

3.What if there were 3,000 pounds of GradeA apples and 5,400 pounds of Grade B? How would that affect theallocation of cost to these two grades? How would it affect theallocation of cost to the remaining common grades?

	Joint Cost
Grades	Allocation
Grade A	$
Grade B	$
Slices	$
Applesauce	$