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 $93,000 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 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:

6

Compute the incremental profit (loss) for each product.

Dorsey Company manufactures three products from a common input in a joint processing operation. Joint processing costs up to the split-off point total $93,000 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 split-off point are as follows:

Explanation / Answer

Income statement upto split up Product A B C Total Sales No of units 14000 19000 4000 37000 selling price per unit 4 5 16 total sales 56000 95000 64000 215000 Joint Processing cost 93000 35189.1892 47756.7568 10054.0541 93000 Profit after spilt up 20810.8108 47243.2432 53945.9459 122000 Income statement aftersplit up Product A B C Total No of units 14000 19000 4000 37000 selling price per Unit 6 8 20 Total sales 84000 152000 80000 316000 93000 35189.1892 47756.7568 10054.0541 93000 Further Processing cost 37000 40000 11000 Incremental Profit 11810.8108 64243.2432 58945.9459 Increment Profit Product A B C No of units 14000 19000 4000 addition selling price 2 3 4 additional sales value 28000 57000 16000 Additional additional cost 37000 40000 11000 Incremental Profit -9000 17000 5000

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