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 $95,000 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: Product Selling Price Quarterly Output A $ 4 per pound 13,000 pounds B $ 5 per pound 18,000 pounds C $ 9 per gallon 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: Product Additional Processing Costs Selling Price A $ 44,000 $ 6 per pound B $ 36,000 $ 9 per pound C $ 11,250 $ 11 per gallon Required: a. Compute the incremental profit (loss) for each product. 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

Product A Product B Product C Selling price after further processing 6 9 11 Selling price at the split-off point 4 5 9 Incremental revenue per pound or gallon 2 4 2 Total quarterly output in pounds or gallons 13000 18000 7000 Total incremental revenue 26000 72000 14000 Total incremental processing costs 44000 36000 11250 Total incremental profit or loss -18000 36000 2750 b Product A should be sold at the split-off point c Product B and Product C should be processed further

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