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 $94,000 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 Quarterly Output 12,000 pounds 17,000 pounds 4,000 gallons Product Selling Price $ 4 per pound $ 5 per pound $16 per gallon Each product can be process facilities. The additional processing costs (per quarter) and unit selling prices after further processing are given below ed further after the split-off poin t. Additional processing requires no special Additional Processing C $ 44,000 $ 35,000 $ 8,250 Product osts Selling Price 7 per pound 9 per pound $ 19 per gallon Required a. Compute the incremental profit (loss) for each product. Product A Product B Product C 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 c Total incremental profit or loss

Explanation / Answer

a. product product product A B C selling price after further processing 7 9 19 selling price at the split off point 4 5 16 incremental revenue per pound or gallon 3 4 3 total quarterly output in pounds or gallons 12,000 17,000 4,000 total incremental revenue 36,000 68000 12,000 total incremental processing costs 44,000 35,000 8,250 total incremental profit or loss -8,000 33,000 3,750 b) sold at split off point product A c) processed further product B product C

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