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 S92.000 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: 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: Compute the incremental profit (loss) for each product.

Explanation / Answer

Statement showing computations Particulars Product A Product B Product C Selling price after further processing                                8.00                                10.00                             14.00 Selling price at split off point                                5.00                                   6.00                             11.00 Incremental Revnue per pound or gallon                                3.00                                   4.00                                3.00 Total Quarterly output                     10,000.00                        15,000.00                       6,000.00 Total Incremental Revenue                     30,000.00                        60,000.00                     18,000.00 Total incremental processing costs                     39,000.00                        40,000.00                     10,000.00 Total Incremental Profit(loss)                     (9,000.00)                        20,000.00                       8,000.00

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