Exercise 12-7 Sell or Process Further [LO12-7] Dorsey Company manufactures three
ID: 2560679 • Letter: E
Question
Exercise 12-7 Sell or Process Further [LO12-7] Dorsey Company manufactures three products from a common input in a joint processing operation. Joint processing costs up to the split-off point total 592,000 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 seling prices and total output at the split-off point are as follows: Selling Price S 5 per pound 2,000 pounds S 5 per pound 17,000 pounds 5 0 per galon 7,000 gallons Output Each product can be processed further after the split-off point. Additional processing requires no special s costs (per quarter) and unit selling prioes a further processing are facilities. The additional processing given below ProductProcessing Costs S 37,000 S 35,000 S 10,000 Selling Price 5 7 per pound 5 0 per pound 5 11 per galon Required a. Compute the incremental profit (oss) for each product. Selling price after further processing Selling price at the split-off point Incremental revenue per pound or gallon Total quarterly output in pounds or gallons Total incremental revenue Total incremental processing Total incremental profit or loss b. 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 CExplanation / Answer
Product A
product B
product C
selling price after further processing
7
9
11
selling price at split off point
5
5
9
incremental revenue per pound/gallon
2
4
2
total quarterly output in pound/gallon
12000
17000
7000
total incremental revenue (incremental revenue*output)
24000
68000
14000
total incremental processing cost
37000
35000
10000
total incremental profit or loss
-13000
33000
4000
Product A should be sold at split off point
Product B & C should be processed further
Product A
product B
product C
selling price after further processing
7
9
11
selling price at split off point
5
5
9
incremental revenue per pound/gallon
2
4
2
total quarterly output in pound/gallon
12000
17000
7000
total incremental revenue (incremental revenue*output)
24000
68000
14000
total incremental processing cost
37000
35000
10000
total incremental profit or loss
-13000
33000
4000
Product A should be sold at split off point
Product B & C should be processed further
Related Questions
drjack9650@gmail.com
Navigate
Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.