Dorsey Company manufactures three products from a common input in a joint proces
ID: 2399608 • Letter: D
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 $305,000 per quarter. For financial reporting purposes, 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
$
11.00
per pound
11,200
pounds
B
$
5.00
per pound
17,600
pounds
C
$
17.00
per gallon
2,400
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
$
50,340
$
15.20
per pound
B
$
71,170
$
10.20
per pound
C
$
25,600
$
24.20
per gallon
Required:
1. What is the financial advantage (disadvantage) of further processing each of the three products beyond the split-off point?
2. Based on your analysis in requirement 1, which product or products should be sold at the split-off point and which product or products should be processed further?
What is the financial advantage (disadvantage) of further processing each of the three products beyond the split-off point? (Enter "disadvantages" as a negative value.)
requirement_content
requr_content_cntr
requirement_cntr
Product A
Product B
Product C
Financial advantage (disadvantage) of further processing
Based on your analysis in requirement 1, which product or products should be sold at the split-off point and which product or products should be processed further?
requirement_content
requr_content_cntr
requirement_cntr
Product A
Product B
Product C
Sell at split-off point?
Process further?
Product
Selling Price
Quarterly
Output
A
$
11.00
per pound
11,200
pounds
B
$
5.00
per pound
17,600
pounds
C
$
17.00
per gallon
2,400
gallons
Explanation / Answer
1) Calculate financial advantage (disadvantage):
b) Analysis :
Product A Product B Product C Sale price after further processing 15.20 10.20 24.20 Sale price at split off point 11 5 17 Incremental sale price 4.20 5.20 7.2 Quantity 11200 17600 2400 Incremental sales revenue 47040 91520 17280 Incremental cost -50340 -71170 -25600 Financial advantage (disadvantage) -3300 20350 -8320Related Questions
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