Dorsey Company manufactures three products from a common input in a joint proces
ID: 2477551 • 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 $96,000 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.
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
Which product or products should be sold at the split-off point?
Which product or products should be processed further?
Dorsey Company manufactures three products from a common input in a joint processing operation. Joint processing costs up to the split-off point total $96,000 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
A./
B./
PRODUCT A SHOULD BE SOLD AT SPLIT OF, BECAUSE IT HAS A LOSS IN REVENUE AFTER FURTHER PROCESSING.
C./
PRODUCT B & C SHOULD BE PROCESSSED FURTHER, AS IT GIVES POSITIVE REVENUE .
DESCRIPTION A B C SELLING PRICE AFTER FURTHER PROCESSING $6 $8 $14 SELLING PRICE AT SPLIT OFF $4 $5 $10 INCREMENTAL PROFIT PER GALLON OR POUND $2 $3 $4 TOTAL QUATERLY OUT PUT IN POUND OR GALLON 15000 20000 6000 TOTAL INCREMENTAL REVENUE $30000 $60000 $24000 LESS- TOTAL INCREMENTAL COST ($39000) ($40000) ($11000) TOTAL INCREMENTAL REVENUE ($9000) $20000 $13000Related Questions
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