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 operaion. Joint processing costs up to the split-off point total $92,000 per quarter. The company allodates theise costs to the joint products on the basis of their relative sales value at the spit-off point Unit seling prices and total output at the split-off point are as follows Price $4 per pound 12,000 pounds $ 5 per pound 17,000 pounds $ 11 per gallon 6,000 gallons Each product can be processed further after the split-off point. Additional processing requires no special faoiliies. The additional processing oosts (per quarter) and unit selling prices after further prooessing are given below Additional Selling Price S 43,000 6 per pound s 38,0009 per pound S 15,280 $14 per gallon Required: a. Compute the incremental profit (loss) for each product Selling price after further processing Selling price at the split-off point Incremental revenue per pound or gallon Total quarterly output in pounds or gallons Total incremental revenue Total incremental Total inoremental profit or loss processing oosts b. Which produet or products should be sold at the split-off point? (You may select more than one answer. Single click the box with a check mark for correct answers and double click to empty the box for the wrong answers.) Product A Product iB Product C a Which product or products should be processed further? (You may select more than one answer Single click the hox with a check mark for correct answers and double click to empty the box for the wrong answers Product A Produet B Product C

Explanation / Answer

Answer a Computation of incremental profit (loss) for each product Product A Product B Product C Selling price after further processing $6.00 $9.00 $14.00 Selling price at split off point $4.00 $5.00 $11.00 Incremental revenue per pound or gallon $2.00 $4.00 $3.00 Total quarterly output in pounds or gallons $12,000.00 $17,000.00 $6,000.00 Total Incremental revenue $24,000.00 $68,000.00 $18,000.00 Total Incremental processing costs $43,000.00 $36,000.00 $15,250.00 Total Incremental profit or loss -$19,000.00 $32,000.00 $2,750.00 Answer b Product A should be sold at split off point as it incurrs incremental loss if processed further. Answer c Product B and Product C should be processed further as both products earns incremental profit of processed further.

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