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 $320,000 per quarter. For financial reporting purposes, 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 Product Selling Price $ 14.00 per pound $ 8.00 per pound $ 20.00 per gallon Quarterly Output 11,800 pounds 18,500 pounds 3,000 gallons 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: Selling Price Additional Product Processing Costs $56,850 $80,875 $31,300 $18.50 per pound $13.50 per pound $27.50 per gallon Required 1. What is the financial advantage (disadvantage) of further processing each of the three products beyond the split-off point? 2. Based on your analysis in requirement 1, which product or products should be sold at the split-off point and which product or products should be processed further? Complete this question by entering your answers in the tabs below. Required 1 Required 2 What is the financial advantage (disadvantage) of further processing each of the three products beyond the split-off point? (Enter "disadvantages" as a negative value.) Product A Product B Product C Financial advantage (disadvantage) of further processing

Explanation / Answer

a Product A Product B Product C Selling price after further processing 18.5 13.5 27.5 Selling price at the split-off point 14 8 20 Incremental revenue per pound or gallon 4.5 5.5 7.5 Total quarterly output in pounds or gallons 11800 18500 3000 Total incremental revenue 53100 101750 22500 Total incremental processing costs 56850 80875 31300 Finanical advantage (disadvantage) -3750 20875 -8800 b Product A should be sold at the split-off point Product B and Product C should be processed further

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