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 $390,000 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: Quarterly Output Product Selling Price A 28.00 per pound 14,600 pounds s 22.00 per pound 22,700 pounds 34.00 per gallon 5,800 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: Additional Processing Costs $91,990 $133,305 62,660 Selling Price $33.90 per pound $28.90 per pound $42.90 per gallon Product Required: 1. What is the financial advantage (disadvantage) of further processing each of the three products beyond the split-off point? 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? Complete this question by entering your answers in the tabs below Required 1 Required2 What is the financial advantage (disadvantage) of further processing each of the three products beyond the split-off point? (Enter "disadvantages" as a negative value.) Product A Product B Product C Financial advantage (disadvantage) of further processing Required 2>

Explanation / Answer

Req 1 & 2)

Product Sales Value before split Allocation of cost before split on Sales value contribution before split (A) Further processing cost Total cost after further processing Sales Value after further processing contribution after further processing (B) Financial Advantage or disadvantage to further process Further process A 408800 144230 264570 91990 236220 494940 258720 Dis-advantage as A > B NO B 499400 176195 323205 133305 309500 656030 346530 Advantage as B > A YES C 197200 69575 127625 62660 132235 248820 116586 Dis-advantage as A > B NO

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