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 $93,000 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 Selling Price $ 3 per pound $ 4 per pound $12 per gallon Quarterly Output 17,000 pounds 22,000 pounds 5,000 gallons Product 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 Product Processing CostsSelling Price $ 5 per pound $ 7 per pound S 16 per gallon S 45,000 $ 36,000 $ 18,000 Required a. Compute the incremental profit (loss) for each product. Product A Product B Product C Selling price after further p rocessing elling price at the split-off point Incremental revenue per pound or gallorn Total quarterly output in pounds or gallons Total incremental revenue Total incremental processing costs 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 C

Explanation / Answer

1 Product A Product B Product C Selling price after further processing 5 7 16 Selling price at the split-off point 3 4 12 Incremental revenue per pound or gallon 2 3 4 Total quarterly output in pounds or gallons 17000 22000 5000 Total incremental revenue 34000 66000 20000 Total incremental processing costs 45000 36000 18000 Total incremental profit or loss -11000 30000 2000 2 Product A should be sold at split off point 3 Product B and C should be processed further

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