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 spit-off point total $95,000 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 splt-off point are as follows Selling Price $ 4 per pound 13,000 pounds s 5 per pound 18,000 pounds S 10 per gallon 6,000 gallions Each product can be processed further after the split-off point. Additional processing requires no special facilties. The additional processing costs (per quarter) and unit selling prices after further processing are given below: Additional Costs Selling Price S 44,000 $ 36,000 $ 14,500 $ 6 per pound $ 8 per pound $ 13 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 incremontal processing costs Total incremental prosit 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 c. Which product or products should be processed further? (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

b)Product A should be sold at splitoff

c)Product B and C should be processed further

A B C Selling priceafter further processing 6 8 13 selling price at split off -4 -5 -10 Incremental revenue per pound or gallon 2 3 3 Total ouput in pounds or gallons 13000 18000 6000 Total incremental revenue 26000   [13000*2] 54000   [18000*3] 18000 [6000*3] Total incremental processing cost -44000 -36000 -14500 Total incremental profit /(loss) -18000   [26000-44000] 18000 [54000-36000] 3500   [18000-14500] Result splitoff since there is a loss on further processing processed further processed further

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