Required: More time could be made available in the upholstery shop by asking the
ID: 2481199 • Letter: R
Question
Required: More time could be made available in the upholstery shop by asking the employees who in this shop to work overtime. Assuming that this extra time would be used to produce up to how much should the company be willing to pay per hour to keep the upholstery open after normal working hours? A small nearby upholstering company has offered to upholster furniture for a fixed charge of $45 per hour. The management of Portsmouth is confident that this stering company's work is high quality and their craftsmen should be able to work about quickly as Portsmouth's own craftsmen on the simpler upholstering jobs such as the love Should management accept this officer? Explain. Dorsey Company manufactures three products from a common input in a joint processing operation. Joint processing costs up to the split-off point total $330,000 per smarter. The company allocates these costs to the joint products on the basis of their relative sales value at the split-off Unit selling prices and total output at the split-off point are as follows: Each product can be processed farther 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:Explanation / Answer
Sales at split off point :
A = $16 * 15000 = $240000
B = $8 * 20000 = $160000
C = $25 * 4000 = $100000
total Sales = $500000
Allocation of Joint Cost:
A = 350000 * 240000 / 500000 = $168000
B = 350000 * 160000 / 500000 = $112000
C = 350000 * 100000 / 500000 = $70000
Calculation of profit for each:
A B C
Sales 300000 260000 128000
Less: Additional Cost 63000 80000 36000
Less: Allocated Joint Cost 168000 112000 70000
Net profit 69000 68000 22000
Profit at split off point = $500000 - $350000 = $150000
Profit on further processing = $69000 + $68000 + $22000 = $159000
It is better to further process
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