Dorsey Company manufactures three products from a common input in a joint proces
ID: 2466657 • Letter: D
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 $92,000 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: Required: Compute the incremental profit (loss) for each product.Explanation / Answer
Particulars
Product A
Product B
Product C
Selling price after further processing
$ 4
$ 7
$ 17
Selling price at split off point
$ 3
$ 4
$ 13
Incremental revenue per pound or gallon
$ 1
$ 3
$ 4
Total Quantity output in pouds or gallons
18,000
23,000
5,000
Total incremental revenue
$ 18,000
$ 69,000
$ 20,000
Total incremental processing costs
$ 38,000
$ 35,000
$ 9,000
Total incremental profit or loss
$ (20,000)
$ 34,000
$ 11,000
Particulars
Product A
Product B
Product C
Selling price after further processing
$ 4
$ 7
$ 17
Selling price at split off point
$ 3
$ 4
$ 13
Incremental revenue per pound or gallon
$ 1
$ 3
$ 4
Total Quantity output in pouds or gallons
18,000
23,000
5,000
Total incremental revenue
$ 18,000
$ 69,000
$ 20,000
Total incremental processing costs
$ 38,000
$ 35,000
$ 9,000
Total incremental profit or loss
$ (20,000)
$ 34,000
$ 11,000
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