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 $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 seling prices and total output at the split-off point are as follows: Product Output Selling Price 5 3 per pound 9,000 pounds 5 4 per pound 24,000 pounds S 9 per galon 7,000 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 ProductProcessing Costs S 40,000 S 35,000 S 11,000 Selling Price 5 4 per pound 5 6 per pound 5 12 per galon Required a. Compute the incremental profit (oss) for each product. Selling price after further p Selling price at the split-off point Incremental revenue per pound or gallon Total quarterly output in pounds or gallons Total incremental revenue Total incremental processing Total incremental profit or loss costs 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

(a) Compute incremental profit /(Loss) for Ech product Product A Product   B Product C 1 Selling Price after Further processing $                4.00 $                   6.00 $               12.00 2 Selling Price at Split off Point $                3.00 $                   4.00 $                  9.00 3 Incremental revenue Per Pound or gallon (1-2) $                1.00 $                   2.00 $                  3.00 4 Total Quarterly output in pounts or gallons 19000 24000 7000 5 Total incremental revenue   (3)*(4) $      19,000.00 $        48,000.00 $       21,000.00 6 Total incremenatl processing costs $      40,000.00 $        35,000.00 $       11,000.00 7 Total incremental profit /(Loss) (5)-(6) $    -21,000.00 $        13,000.00 $       10,000.00 (b) Which Product or products should be sold at the split off point Product A Should be sold at Split off Point. Because it generating Incremental Loss (Loss $21000) in further Processing   (C ) Which Product or products should be Processed Further Product B and product C are need to be Further Processed. Because it generating Incremental revenue ( A - profit 13000 , profit   B 10,000)after further processing

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