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 $92,000 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 $ 3 per pound $ 4 per pound $12 per gallon 18,000 pounds 23,000 pounds 5,000 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: Additional Processing Costs 41,000 38,000 18,000 Product Selling Price $ 4 per pound $ 7 per pound $16 per gallon Required a. Compute the incremental profit (loss) for each product. ProductA Product B Product C Selling price after further processing Selling price at the split-off point Incremental revenu Total quarterly output in pounds or gallons Total incremental revenue Total incremental processing costs Total incremental profit or loss e per pound or gallon 0

Explanation / Answer

a) Compute incremental profit (loss) for each product :

Product A Product B Product C Selling price after further processing 4 7 16 Selling price at the split off point 3 4 12 Incremental revenue per pound or gallon 1 3 4 Total quarterly output in pounds or gallons 18000 23000 5000 Total incremental revenue 18000 69000 20000 Total incremental processing costs 41000 38000 18000 Total incremental profit or loss (23000) 31000 2000

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