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 $91 000 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 Compute the incremental profit (loss) for each product 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.) Which product or products should be processed further? (You may select more than one answer. Single click the box with a

Explanation / Answer

Profit = Total Revenue - Total cost

Total Revenue = Price*Quantity

1. The incremental profit for A

= T (Total Revenue after increment- incremental cost) - Total revenue of A before increment

=( 5*14000 -36000) - 4*14000

= -24000

The incremental profit for B

= T (Total Revenue after increment- incremental cost) - Total revenue of B before increment

=( 8*19000 -39000) - 5*19000

= 18000

The incremental profit for

= T (Total Revenue after incrment- incremental cost) - Total revenue of C before increment

=( 12*7000 -12000) - 9*7000

= 9000

B.   Product A

As it incremental profit is negitive(i.e Loss).

C. Product B and Product C

As there incremental profit is positive

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