oo cricket LTE 02:39 ezto.mheducation.com copy of ACC 202: Fall 2017 ACCOUNTING

ID: 2560020 • Letter: O

Question

oo cricket LTE 02:39 ezto.mheducation.com copy of ACC 202: Fall 2017 ACCOUNTING apter 12 Homework Question 2 (of 2) 75.00 points Dorsey Company manufactures three products from a common input in a joint processing operation. Joint processing costs up to the split-off point total $92,000 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: Product Seling Price 3per pound 4per pound per gallon Output 16,000 pounds 21,000 pounds 7,000 gallons 9 Each product can be processed further after the split-off point. Additional processing re additional processing costs (per quarter) and unit selling prices after further processing are given below: quires no special facilities. T he Product Processing Costs Selling Price $ 43,000 36,000 17.500 $ 5 per pound $ 7 per pound $ 12 per galion Required a Compute the incremental profit (loss) for each product. Selling price after turther processing Selling price at the split-off point Incremental revenue per pound or gallon Total quarterly output in pounds or galons Total incremental proft or loss

Explanation / Answer

Solution:

Part a – Incremental Profit (loss) for each product

Product A

Product B

Product C

Selling price after further processing (A)

$12

Selling price at the split off point (B)

Incremental revenue per pound or gallon (C=A-B)

Total quarterly output in pounds or gallons (D)

16000

21000

7000

Total Incremental Revenue (E = C*D)

$32,000

$63,000

$21,000

Total Incremental Processing Costs (F)

$43,000

$36,000

$17,500

Total incremental profits of loss (E – F)

($11,000)

$27,000

$3,500

Part b – Product A, Product B and Product C should be sold at the split off point since all the product at split off point is profitable.

Hence, all the product A, B and C can be sold at split off point.

Part C – Product B and Product C can be processed further since these products are profitable after further processing.

Product A cannot be processed further since Product A is not profitable after further processing.

Hope the above calculations, working and explanations are clear to you and help you in understanding the concept of question.... please rate my answer...in case any doubt, post a comment and I will try to resolve the doubt ASAP…thank you