Dorsey Company manufactures three products from a common input in a joint proces
ID: 2460699 • 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 $99,000 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 $ 4 per pound 13,000 pounds B $ 5 per pound 18,000 pounds C $ 16 per gallon 4,000 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 $ 37,000 $ 6 per pound B $ 37,000 $ 9 per pound C $ 11,000 $ 20 per gallon Required: Compute the incremental profit (loss) for each product. Which product 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 B Product C Which product or products should be processed further? (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 B Product CExplanation / Answer
Particualars
Product A
Product B
Product C
Selling price after further processing
6
9
20
Selling price at split off point
4
5
16
incremental revenue per pound or gallon
2
4
4
Total quarterly output in pouds or gallons
13,000
18,000
4,000
Total incremental revenue
26,000
72,000
16,000
Total incremental processing costs
37,000
37,000
11,000
Total incremental profit or loss
(11,000)
35,000
5,000
Product A should be sold at split off point
Product A and B should be processed further
Particualars
Product A
Product B
Product C
Selling price after further processing
6
9
20
Selling price at split off point
4
5
16
incremental revenue per pound or gallon
2
4
4
Total quarterly output in pouds or gallons
13,000
18,000
4,000
Total incremental revenue
26,000
72,000
16,000
Total incremental processing costs
37,000
37,000
11,000
Total incremental profit or loss
(11,000)
35,000
5,000
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