Dorsey Company manufactures three products from a common input in a joint proces

Question

Dorsey Company manufactures three products from a common input in a joint processing operation. Joint processing costs up to the split-off point total $350,000 per quarter. The company allocates these costs to the joint products on the basis of their relative sales value at the split-off point. Unit selling prices and total output at the split-off point are as follows:

Product Selling Price Quarterly
Output
A $17 per pound 14,000 pounds
B $6 per pound 19,900 pounds
C $26 per gallon 2,100 gallons

Each product can be processed further after the split-off point. Additional processing requires no special facilities. The additional processing costs (per quarter) and unit selling prices after further processing are given below:

Product Additional
Processing Costs Selling Price
A $64,400 $19 per pound
B $81,500 $14 per pound
C $36,500 $30 per gallon


Required:
(a) Compute the incremental profit (loss) for each product. (Negative amounts should be indicated by a minus sign. Omit the "$" sign in your response.)

Product A Product B Product C
Incremental profit (loss) $ $ $

Explanation / Answer

Product A:

19-17 = $2. $2*14,000 = $28,000
$28,000 - 64,400 = Loss of 36,400

ANswer for product A: Loss of 36,400

Product B:

14-6 = $8. $8*19,900 = $159,200
$159,200 - 81,500 = $77,700

Answer for product B: profit of $77,700

Product C:

30-26 = $4. $4*2,100 = $8,400
$8,400 - 36,500 = loss of $28,100

Answer for product C: Loss of 28,100

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