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 $325,000 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 Quarterly Output 12,000 pounds 18,800 pounds Product Selling Price $ 15.00 per pound $ 9.00 per pound $ 21.00 per gallon 3,200 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: Additional Selling Price Product Processing Costs $59,100 $84,230 $33,280 $19.60 per pound $14.60 per pound $28.60 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?

Explanation / Answer

1 Product A Product B Product C Selling price after further processing 19.6 14.6 28.6 Selling price at the split-off point 15 9 21 Incremental revenue per pound or gallon 4.6 5.6 7.6 Total quarterly output in pounds or gallons 12000 18800 3200 Total incremental revenue 55200 105280 24320 Total incremental processing costs 59100 84230 33280 Financial advantage (disadvantage) -3900 21050 -8960 2 Product A and Product C should be sold at the split-off point Product B should be processed further

Related Questions

Navigate

• Browse (All)
• Browse D
• Subjects

---

---

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.