Dorsey Company manufactures three products from a common input in a joint proces
ID: 2738106 • Letter: D
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 $90,000 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:
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:
7
Compute the incremental profit (loss) for each product.
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 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 Selling Price QuarterlyOutput A $ 5 per pound 11,000 pounds B $ 6 per pound 16,000 pounds C $ 16 per gallon 4,000 gallons
Explanation / Answer
a.Compute the incremental profit (loss) for each product.
Working:
Total incremental revenue A:11000x2=22000, B:16000x4=64000, C:4000x4=16000
b.Which product or products should be sold at the split-off point?
Answer: Product A
c. Which product or products should be processed further?
Answer: Product B & Product C
Product A Product B Product C Selling price after further processing $7 $10 $20 Selling price at the split-off point 5 6 16 Incremental revenue per pound or gallon 2 4 4 Total quarterly output in pounds or gallons 11,000 16,000 4,000 Total incremental revenue 22,000 64,000 16,000 Total incremental processing costs 36,000 36,000 10,000 Total incremental profit or loss $(14,000) $28,000 $6,000Related Questions
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