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 $98,000 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: Selling Price $ 4 per pound $ 5 per pound $ 9 per gallon Quarterly Output 14,000 pounds 19,000 pounds 7,000 gallons Product 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 $ 43,000 $ 38,000 $11,000 Selling Price $ 5 per pound $ 8 per pound $ 11 per gallon Product 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 incremental processing costs Total incremental profit or loss

Explanation / Answer

A Product A Product B Product C Selling Price After Further Processing 5.00 8.00 11.00 Selling Price at the Split Off Point 4.00 5.00 9.00 Incremental Revenue Per Pound or Gallon 1.00 3.00 2.00 Total Quarterly Output in Pounds or Gallons 14,000 19,000 7,000 Total Incremental Revenue 14,000 57,000 14,000 Total Incremental Processing Costs 43,000 38,000 11,000 Total Incremental Profit & Loss -29,000 19,000 3,000 B Product Product A Yes Product B No Product C No C Product Product A No Product B Yes Product C Yes

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