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 $96,000 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 selling prices and total output at the split-off point are as follows Quarterly 15,000 pounds 20,000 pounds 7,000 gallons Product Selling Price Output S3er ice $ 3 pound per pound $ 5 gallon 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 43,000 Product Selling Price 5 per pound pound gallon 8 per 10,500 11 per Required a. Compute the incremental profit (loss) for each product. Selling price after further rocessin Selling price at the split-off point Incremental revenue per pound or gallon Total quarterly output in pounds or gallon:s Total incremental revenue Total incremental processing costs Total incremental profit or loss 0 S 0 S 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

Explanation / Answer

Compute incremental profit of each product :

Product A should sold at split off point.

Product B and Product C should be sold after further processing.

Product A Product B Product C Sales price after further processing 5 8 11 Sales price at split off point 3 5 9 Incremental revenue per unit 2 3 2 No of units 15000 20000 7000 Incremental revenue 30000 60000 14000 Less: Additional cost (43000) (39000) (10500) Incremental profit (loss) (13000) 21000 3500

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