Dorsey Company manufactures three products from a common input in a joint proces
ID: 2471978 • 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 $94,000 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:
Product
Selling Price
Quarterly
Output
A
$
4
per pound
14,000
pounds
B
$
5
per pound
19,000
pounds
C
$
10
per gallon
6,000
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:
Product
Additional
Processing Costs
Selling Price
A
$
38,000
$
6
per pound
B
$
39,000
$
8
per pound
C
$
10,000
$
13
per gallon
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
b.
Which product or products should be sold at the split-off point? (You may select more than one answer. Single click the box with a check mark for correct answers and double click to empty the box for the wrong answers.)
__Product A
__Product B
__Product C
c.
Which product or products should be processed further? (You may select more than one answer. Single click the box with a check mark for correct answers and double click to empty the box for the wrong answers.)
__Product A
__Product B
__Product C
Dorsey Company manufactures three products from a common input in a joint processing operation. Joint processing costs up to the split-off point total $94,000 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
Working notes:
a)
b)
Product A should be sold at split off point as further processing of the product will generate loss for the company
c) Product B and C should be further processed as they will increase the total profit by $18000 and $8000 respectively.
Product A B C Total Selling Price $4 per pound $5 per ound $10 per gallon Quarterly Output 14000 pounds 19000 pounds 6000 gallons Sale Value ($) 56000 95000 60000 211000 Allocation of joint cost in the ratio of sale value ($) 24948 42322 26730 94000 (56:95:60) Profit at split off point ($) 31052 52678 33270 117000Related Questions
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