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 Quarterly Output 10,000 pounds 15,000 pounds 7,000 gallons Product Selling Price $ 5 per pound $ 6 per pound $ 9 per gallon 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 Additional Processing Costs $ 44,000 $ 37,000 $ 19,000 Product Selling Price $ 8 per pound S 11 per pound $ 12 per gallon Required a. Compute the incremental profit (loss) for each product. Product A Product B Product C Selling price after further processing Selling price at the split-off point Incremental revenue per pound or gallon lotal quarterly output in pounds or gallons Total incremental revenue Total incremental processing costs Total incremental profit or loss

Explanation / Answer

Statement showing computations Particulars Product A Product B Product C Selling price after further processing                           8.00                         11.00                         12.00 Selling price at split off point                           5.00                            6.00                            9.00 Incremental revenue per pound or gallon                           3.00                            5.00                            3.00 Total Quarterly output in pounds or gallons                10,000.00                 15,000.00                   7,000.00 Total Incremental Revenue                30,000.00                 75,000.00                 21,000.00 Total Incremental Processing costs                44,000.00                 37,000.00                 19,000.00 Total Incremental profit or loss              (14,000.00)                 38,000.00                   2,000.00 Sold at split off Process Further Process Further b) Product A c) Product B and Product C

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