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Allocating Joint Costs

Allocating Joint Costs

The American Produce Company purchased a truckload of cantaloupes (weighing 5,900 pounds) for $980. American Produce separated the cantaloupes into two grades: superior and economy. The superior grade cantaloupes had a total weight of 3,400 pounds and the economy grade cantaloupes totaled 2,500 pounds. Fresh Produce sells the superior grade at $0.40 per pound and the economy grade at $0.10 per pound.

Required

Allocate the $1,000 cost of the truckload to the superior grade and economy grade cantaloupes using the physical quantity method and the relative sales value method. (Round answer to 0 decimal places.)

Allocation using physical quantity method
Superior grade Economy grade
Joint Cost $ $

Allocation using relative sales value method
Superior grade Economy grade
Joint Cost $ $

Solution Preview

a. Physical quantity method - In this, the cost is allocated based on pounds produced. Superior is 3,400 pounds and economy is 2,500 pounds
Cost allocated to superior = $1,000 ...

Solution Summary

The solution explains how to allocate joint costs using physical quantity method and relative sales value method

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