Dorsey Company manufactures three products from a common input in a joint proces
ID: 2523943 • 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 $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:
Product Selling Price Quarterly
Output
A $ 4 per pound 14,000 pounds
B $ 5 per pound 19,000 pounds
C $ 13 per gallon 5,000 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 $ 42,000 $
6
per pound
B $ 38,000 $ 8 per pound
C $ 17,000 $ 17 per gallon
Required:
a.
Compute the incremental profit (loss) for each product.
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
Explanation / Answer
Dorsey Company Incremental Revenue A B C a) Selling Price after further processing $ 6.00 $ 8.00 $ 17.00 Selling Price at Split off Point $ 4.00 $ 5.00 $ 13.00 Additional Selling Price=(A) $ 2.00 $ 3.00 $ 4.00 Quartely Output=(B) 14000 19000 5000 Total additional selling Price=(A)*(B) $ 28,000.00 $ 57,000.00 $ 20,000.00 Less: Additional Processing Cost $ 42,000.00 $ 38,000.00 $ 17,000.00 Incremental Revenue $ (14,000.00) $ 19,000.00 $ 3,000.00 b) The Company Should sold product A at split off point. c) The Company should sold product B and C after split off point . Working Joint cost at Split off Point Sales Cost Product A 14000 91000*(14000/38000) $ 33,526.32 Product B 19000 91000*(19000/38000) $ 45,500.00 Product C 5000 91000*(5000/38000) $ 11,973.68 Total 38000 $ 91,000.00 Product A B C Sales Units at split off point 14000 19000 5000 Selling Price per unit $ 4.00 $ 5.00 $ 13.00 Total Selling Price $ 56,000.00 $ 95,000.00 $ 65,000.00 Cost at Split off Point $ 33,526.32 $ 45,500.00 $ 11,973.68 Revenue at Split off Point $ 22,473.68 $ 49,500.00 $ 53,026.32
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