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 $390,000 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: Quarterly Output Product Selling Price s 28.00 per pound14,600 pounds s 22.00 per pound 22,700 pounds 34.00 per gallon 5,800 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: Additional Processing Costs $91,990 $133,305 62,660 Selling Price $33.90 per pound $28.90 per pound 42.90 per gallon Product

Explanation / Answer

Incremental analysis :

Analysis :

Product A Product B Product C Sale price after further processing 33.90 28.90 42.90 Sale price at split off point 28 22 34 Incremental sale price 5.9 6.9 8.9 Quantity 14600 22700 5800 Incremental sales revenue 86140 156630 51620 Less: Incremental cost 91990 133305 62660 Financial advantage (disadvantage) of further processing -5850 23325 -11040

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