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 $365,000 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:

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:

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

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.)

Required 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?

Product Selling Price Quarterly
Output A $ 23.00 per pound 13,600 pounds B $ 17.00 per pound 21,200 pounds C $ 29.00 per gallon 4,800 gallons

Explanation / Answer

Statement showing computations Particulars Product A Product B Product C Selling price after further processing                        28.40                         23.40                        37.40 Selling price at split off point                        23.00                         17.00                        29.00 Incremental revenue per pound or gallon                           5.40                            6.40                           8.40 Total Quarterly output in pounds or gallons                13,600.00                 21,200.00                  4,800.00 Total Incremental Revenue                73,440.00               135,680.00                40,320.00 Total Incremental Processing costs                78,540.00               113,230.00                50,560.00 1) Total Incremental profit or loss or financial advantage (disadvantage)                (5,100.00)                 22,450.00              (10,240.00) 2) Sold at split off Process Further Sold at split off

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