Dorsey Company manufactures three products from a common Input In a Jolnt proces

Question

Dorsey Company manufactures three products from a common Input In a Jolnt processing operation. Jolnt processing costs up to the split-off polnt total $315,000 per quarter. For financlal reporting purposes, the company allocates these costs to the Jolnt products on the basis of thelr relative sales value at the split-off point. Unit sellng prices and total output at the split-off polnt are as follows: Product Selling Price A $13.e0 per pound B S 7.ee per pound Quarterly Output 11,600 pounds 18,2e0 pounds $19.00 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 Price Additional Product Processing costs $54,640 $77,58e $29,360 $17.40 per pound $12.40 per pound $26.40 per gallon Requirec 1. What Is the financial advantage (disadvantage) of further processing each of the three products beyond the split-off point? 2. Based on your analysls In requirement 1, which product or products should be sold at the split-off polnt and which product or products should be processed further? Complete this question by entering your answers in the tabs below Required 1Required 2 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 Financial advantage (disadvantage) of further processing

Explanation / Answer

1 A B C Selling price after further processing 17.4 12.4 26.4 Selling price at the split-off point 13 7 19 Incremental revenue per pound or gallon 4.4 5.4 7.4 Total quarterly output in pounds or gallons 11600 18200 2800 Total incremental revenue 51040 98280 20720 Total incremental processing costs 54640 77580 29360 Financial advantage(disadvantage) -3600 20700 -8640 A B C Sell at split off point Yes No Yes Process further No Yes No

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