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Allocating Joint Costs Using the Sales$-$Value$-$at$-$Split$-$Off Method

Sunny Lane, Inc., purchases peaches from local orchards and sorts them into four categories. Grade A are large blemish$-$free peaches that can be sold to gourmet fruit sellers. Grade B peaches are smaller and may be slightly out of proportion. These are packed in boxes and sold to grocery stores. Peaches to be sliced for canned peaches are even smaller than Grade B peaches and have blemishes. Peaches to be pureed for use in sauces are of lower grade than peaches for slices, yet still food grade for canning.

Information on a recent purchase of $20,000$ pounds of peaches is as follows: Assume that Sunny Lane, Inc., uses the sales$-$value$-$at$-$split$-$off method of joint cost allocation and has provided the following information about the four grades of peaches:

Grades Pounds Price at Split$-$Off $($per lb$.)$

Grade A $1,800$ $$6\mathrm{.}00$

Grade B $4,0002\mathrm{.}00$

Slices $9,0001\mathrm{.}30$

Pureed $5,2000\mathrm{.}80$

Total $20,000$

Total joint cost is $$21,000.$

Required:

$1.$ Allocate the joint cost to the four grades of peaches using the sales$-$value$-$at$-$split$-$off method. Round your allocation percentages to four decimal places and round the allocated costs to the nearest dollar.

Joint Cost

Grades Allocation

Grade A $fill in the blank $1$

Grade B fill in the blank $2$

Slices fill in the blank $3$

Pureed fill in the blank $4$

Total $fill in the blank $5$

$2.$ What if the price at split$-$off of Grade B peaches increased to $$1\mathrm{.}60$ per pound? How would that affect the allocation of cost to Grade B peaches? How would it affect the allocation of cost to the remaining grades? Round your allocation percentages to four decimal places and round the allocated costs to the nearest dollar.

Joint Cost

Grades Allocation

Grade A $fill in the blank $6$

Grade B fill in the blank $7$

Slices fill in the blank $8$

Pureed fill in the blank $9$

Total $fill in the blank $10$

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