oint processing operation. Joint processing costs up to Dorsey Company manufactu

Question

oint processing operation. Joint processing costs up to Dorsey Company manufactures three products from a common input in a j the split-off point total $350,000 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 per quarter. For financial reporting purposes, the company allocates these costs to the Output ds 20,000 pounds B 8 per pound c 25 per gallon 4,000 gallons 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 Additiona) processing Costs $63,8e0 $8e,000 $36,000 Selling $20 per pound $13 per pound $32 per gallon

Explanation / Answer

a) Financial advantage or disadvantage of further processing :

b) Analysis :

Product A Product B Product C Sale price after further processing 20 13 32 Sale price at split off point 16 8 25 Incremental sale price 4 5 7 Quantity 15000 20000 4000 Incremental sales revenue 60000 100000 28000 Less: Additional cost -63000 -80000 -36000 Incremental profit (loss) -3000 20000 -8000

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