6 Dorsey Company manufactures three products from a common input in a joint proc

Question

6 Dorsey Company manufactures three products from a common input in a joint processing operation. Joint processing costs up to the split-off point total $365,000 per quarter. For financial reporting purposes, 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 Output A 23.00 per pound 13,600 B 17.00 per pound c 29.00 per gallon 21,200 pounds 4,800 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 Selling 78,540 $28.40 per pound $23.40 per pound Print $113,230 50,560 $37.40 per gallon Required 1. What is the financial advantage (disadvantage) of further processing each of the three products beyond the split-off point? 2. Based on your analysis in requirement 1, which product or products should be sold at the split-off point and which product or products should be processed further? Complete this question by entering your answers in the tabs below. Required 1 Required 2 What is the financial advantage (disadvantage) of further processing each of the three products beyond the split-off point? (Enter "disadvantages" as a negative value.) ct B

Explanation / Answer

Required 1

Financial advantage = Incremental revenues - Incremental costs

Required 2

Product Incremental costs Incremental revenues A 78,540 73,440 [(28.4-23)*13,600] B 113,230 135,680 [(23.4-17)*21,200] C 50,560 40,320 [(37.4-29)*4,800]

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