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 $305,000 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?

Product Selling Price Quarterly
Output A $ 11.00 per pound 11,200 pounds B $ 5.00 per pound 17,600 pounds C $ 17.00 per gallon 2,400 gallons

Explanation / Answer

1).

2a). Product A and C Should be sold at the split off point because it reported incremental loss after further

Processing.

2b). Product B should be processed further because it reported incremental profit after further processing.

Particulars Product A Product B Product C Selling Price after further processing per pound $15.20 $10.20 $24.20 Selling price at the split off point per pound $11 $5 $17 Incremental revenue per pound or gallons $4.20 $5.20 $7.20 Total Quarterly output in pounds or gallons 11200 17600 2400 Total incremental revenue (a) $47040 $91520 $17280 Total Incremental processing costs (b) $50340 $71170 $25600 Total Incremental Profit or Loss (a-b) ($3300) $20350 ($8320)

Related Questions

Navigate

• Browse (All)
• Browse D
• Subjects

---

---

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.