Dorsey Company manufactures three products from a common input in a joint proces
ID: 2548889 • 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 $385,000 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: Product Selling Price Quarterly Output A $ 27.00 per pound 14,400 pounds B $ 21.00 per pound 22,400 pounds C $ 33.00 per gallon 5,600 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 $ 89,220 $ 32.80 per pound B $ 129,170 $ 27.80 per pound C $ 60,160 $ 41.80 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?
Explanation / Answer
1. What is the financial advantage (disadvantage) of further processing each of the three products beyond the split-off point
1) Product A and C should be sold at split off point
Product B should be sold after further process
Product A Product B Product C Sale price after further processing 32.80 27.80 41.80 Sale price at split off point 27 21 33 Incremental revenue per pound/gallon 5.80 6.80 8.80 Quantity 14400 22400 5600 Incremental revenue 83520 152320 49280 Incremental cost (89220) (129170) (60160) Incremental profit (loss) (5700) 23150 (10880)Related Questions
drjack9650@gmail.com
Navigate
Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.