1. Dorsey Company Dorsey Company manufactures three products from a common input
ID: 2403922 • Letter: 1
Question
1. Dorsey Company
Dorsey Company manufactures three products from a common input in a joint processing operation. Joint processing costs up to the split-off point total $310,000 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 A 12.00 per pound11,400 pounds B $6.00 per pound 17,900 pounds C $ 18.00 per gallon 2,600 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 $52,470 $74,345 $27,460 Selling Price S16.30 per pound 11.30 per pound $25.30 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? Complete this question by entering your answers in the tabs below Required 1Required 2 What is the financial advantage (disadvantage) of further processing each of the three products beyond the split-off point? (Enter "disadvantages" as a negative value.) Product A Product B Product C Financial advantage (disadvantage) of further processingExplanation / Answer
Solution 1:
As there is financial advantage of $20,525 on further processing of Product B, therefore product B should be further processed, Further there is financial disadvantage on further processing of Product A and Product C, therefore Product A and Product C should be sold at split off point.
Financial advantage (disadvantage) to determine which product to be sold at split off and which is to be further processed - Dorsey Company Particulars Product A Product B Product C Selling price after further processing $16.30 $11.30 $25.30 Selling price at split off point $12.00 $6.00 $18.00 Increment revenue per pound or gallon $4.30 $5.30 $7.30 Total quarterly output in pound or gallon 11400 17900 2600 Total Incremental Revenue $49,020.00 $94,870.00 $18,980.00 Total incremental processing cost $52,470.00 $74,345.00 $27,460.00 Financial advantage (disadvantage) of further processing -$3,450.00 $20,525.00 -$8,480.00Related Questions
Navigate
Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.