Exercise 10-7 Sell or Process Further [LO10-7] Dorsey Company manufactures three
ID: 2524307 • Letter: E
Question
Exercise 10-7 Sell or Process Further [LO10-7]
Dorsey Company manufactures three products from a common input in a joint processing operation. Joint processing costs up to the split-off point total $100,000 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:
6
Compute the incremental profit (loss) for each product.
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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.)
product A
product B
product C
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.)
Dorsey Company manufactures three products from a common input in a joint processing operation. Joint processing costs up to the split-off point total $100,000 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:
Explanation / Answer
a Product A Product B Product C Selling price after further processing 6 9 12 Selling price at the split-off point 4 5 9 Incremental revenue per pound or gallon 2 4 3 Total quarterly output in pounds or gallons 13000 18000 7000 Total incremental revenue 26000 72000 21000 Total incremental processing costs 44000 35000 19000 Total incremental profit or loss -18000 37000 2000 b Product A should be sold at the split-off point c Product B and Product C should be processed further
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