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 $375,000 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 Product Selling Price s 25.00 per pound14,000 pounds 19.00 per pound 21,800 pounds 31.00 per gallon 5,200 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 Processing Costs $83,800 $121,080 $55,280 Selling Price $30.60 per pound $25.60 per pound 39.60 per gallon Product

Explanation / Answer

1) Incremental analysis :

Analysis :

Product A Product B Product C Sale price after further processing 30.60 25.60 39.60 Sale price at split off point 25 19 31 Incremental sale price 5.60 6.60 8.60 Quantity 14000 21800 5200 Incremental sale revenue 78400 143880 44720 Incremental cost -83800 -121080 -55280 Incremental profit (loss) -5400 22800 -10560

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