Dorsey Company manufactures three products from a common iInput in a joint proce

Question

Dorsey Company manufactures three products from a common iInput in a joint processing operation. Joint processing costs up to the split-off polnt total $315,000 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 B$7.00 per pound18,200 pounda C19.00 per gallon 2,800 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 $54,640 B $77,580 12.40 per pound $29,360 allon Required: 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

a)Calculate financial advantage :

2) Product A and product C shoule be processed at split off point and Product B should be further process

Product A Product B Product C Sale price after further processing 17.40 12.40 26.40 Sale price at split off point 13 7 19 Incremental price per pound 4.40 5.40 7.40 quantity 11600 18200 2800 Incremental revenue 51040 98280 20720 Incremental cost (54640) (77580) (29360) Financial advantage (disadvantage) (3600) 20700 (8640)

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