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 $360,000 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 Quarterly Output Product Selling Price $ 22.00 per pound 13,400 pounds $16.00 per pound 20,900 pounds $ 28.00 per gallon4,600 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: Additional Processing Costs $75,970 $109,395 $ 48,260 Selling Price $27.30 per pound $22.30 per pound $36.30 per gallon Product 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?

Explanation / Answer

Solution:

From above analysis we can say that product A and product C should be sold at split off point and Product B should be sold after further processing.

Allocation of Joint Cost Product Selling price per unit at split off point Quarterly output Sale Value at split off point Joint Cost Allocation base Allocated Cost A $22.00 13400 $294,800.00 $360,000.00 Sale value at split off Point $140,010.55 B $16.00 20900 $334,400.00 $360,000.00 Sale value at split off Point $158,817.94 C $28.00 4600 $128,800.00 $360,000.00 Sale value at split off Point $61,171.50

Related Questions

Navigate

• Browse (All)
• Browse D
• Subjects

---

---

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