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 $320,000 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 B s8.80 per pound 18,580 pounds C 20e.08 per gallon 3,e00 gallons Each product can be processed further after the split-off point Additional processing requires no special facilities. The addlitional processing costs (per quarter) and unit selling prices after further processing are given below $56,850 $80,875 $31,300 $18.58 per pound $13.50 per pound $27.50 per gallon Required: is the finan 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? Complete this question by entering your answers in the tabs below K Prey 3 of 4E Next

Explanation / Answer

Dorsey Company Part a. Incremental Analysis A B C Selling Price after further Processing 18.5 13.5 27.5 Selling price at the split off point 14 8 20 Incremental Revenue 4.5 5.5 7.5 Total Quarterly Output 11800 18500 3000 Total Inccremental Revenue 53100 101750 22500 Total Incremental Processing Cost 56850 80875 31300 Total Incremental Profit or Loss -3750 20875 -8800 1. The Financial Adgantage/disadvantage of further processing beyond split-off point -3750 20875 -8800 2. Product A and C should be sold at split off point Product B should be processed further as it is giving positive results.

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