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 $91,000 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: 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.) 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.)

Explanation / Answer

Dorsey Company All Amounts in $ a. Incremental Profit/(Loss) for each Product Product Product Product A B C Selling Price after further processing 6 8 10 Selling Price at split-off point 4 5 8 Incremental Revenue per Pound 2 3 2 Total Quarterly output in Pounds 15000 20000 8000 Total Incremental Revenue 30000 60000 16000 Total Incremental Processing Costs 38000 37000 11000 Total Incremental Profit or Loss -8000 23000 5000 b. Products which should be sold at the split-off point are only Product A. c. Products which should be processed further are Products B and C.

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