Dorsey Company manufactures three products from a common input in a joint proces
ID: 2589402 • Letter: D
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 $340,000 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:
Product
Selling Price
Quarterly
Output
A
$
18.00
per pound
12,600
pounds
B
$
12.00
per pound
19,700
pounds
C
$
24.00
per gallon
3,800
gallons
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:
Product
Additional
Processing Costs
Selling
Price
A
$
66,090
$
22.90
per pound
B
$
94,655
$
17.90
per pound
C
$
39,460
$
31.90
per gallon
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
$
18.00
per pound
12,600
pounds
B
$
12.00
per pound
19,700
pounds
C
$
24.00
per gallon
3,800
gallons
Explanation / Answer
1 A B C Selling price after further processing 22.9 17.9 31.9 Selling price at the split-off point 18 12 24 Incremental revenue per pound or gallon 4.9 5.9 7.9 Total quarterly output in pounds or gallons 12600 19700 3800 Total incremental revenue 61740 116230 30020 Total incremental processing costs 66090 94655 39460 Total incremental profit or loss -4350 21575 -9440 2 Products A and C should be sold at the split-off point Product B should be processed further
Related Questions
drjack9650@gmail.com
Navigate
Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.