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 $97,000 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:

     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:

8

Compute the incremental profit (loss) for each product.

Which product or products should be sold at the split-off point?

Which product or products should be processed further?

Dorsey Company manufactures three products from a common input in a joint processing operation. Joint processing costs up to the split-off point total $97,000 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:

Explanation / Answer

a Product A Product B Product C Selling price after further processing 8 11 20 Selling price at the split-off point 5 6 16 Incremental revenue per pound or gallon 3 5 4 Total quarterly output in pounds or gallons 10000 15000 4000 Total incremental revenue 30000 75000 16000 Total incremental processing costs 45000 36000 14000 Total incremental profit or loss -15000 39000 2000 b Product A should be sold at the split-off point c Product B and C should be processed further

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