Exercise 12-7 Sell or Process Further [LO12-7] Dorsey Company manufactures three

Question

Exercise 12-7 Sell or Process Further [LO12-7]

Dorsey Company manufactures three products from a common input in a joint processing operation. Joint processing costs up to the split-off point total $350,000 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 check mark for correct answers and double click to empty the box for the wrong answers.)

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 $350,000 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) Compute the incremental profit (loss) for each product.

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b) Product A and product C should be sold at split off point

c) Product B should be sold after further processing

Product A Product B Product C Sale price after further processing 20

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32 Sale price at split off point 16 8 25 Incremental sale price 4 5 7 Quantity 15000 20000 4000 Incremental sales revenue 60000 100000 28000 Less: Additional cost -63000 -80000 -36000 Incremental profit (loss) -3000 20000 -8000

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