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 $345,000 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:

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:

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 $ 19.00 per pound 12,800 pounds B $ 13.00 per pound 20,000 pounds C $ 25.00 per gallon 4,000 gallons Complete this question by entering your answers in the tabs below. Required Required 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 processing

Explanation / Answer

a Product A Product B Product C Selling price after further processing 24 19 33 Selling price at the split-off point 19 13 25 Incremental revenue per pound or gallon 5 6 8 Total quarterly output in pounds or gallons 12800 20000 4000 Total incremental revenue 64000 120000 32000 Total incremental processing costs 68500 98250 41600 Financial advantage (disadvantage) -4500 21750 -9600 b Product A and Product C should be sold at the split-off point Product B should be processed further

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