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 $305,000 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: Product Selling Price $ 11.00 per pound $ 5.00 per pound $ 17.00 per gallon Quarterly Output 11, 200 pounds 17,600 pounds 2,400 gallons B C 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: coduct Additional Processing Costs $50, 340 $71,170 $ 25,600 Selling Price $15.20 per pound $10.20 per pound $24.20 per gallon 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? Required 1 Required 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 C Financial advantage (disadvantage) of further processing Required 1 Required 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? Product A Product B Product C Sell at split-off point? Process further?

Answer 1

1)	Financial Advantages or disadvantages of further processing
		Product A	Product B	Product C
A	Selling price per unit after further process	$               15.20	$               10.20	$           24.20
B	Number of units sold	11200	17600	2400
C	Sales Revenue	$         1,70,240	$         1,79,520	$         58,080
D	Further Processing cost	$             50,340	$             71,170	$         25,600
E	Net (C-D)	$         1,19,900	$         1,08,350	$         32,480
F	Sales Price at split off point	$                     11	$                        5	$                 17
G	Sales Revenue at split of point (B*F)	$         1,23,200	$             88,000	$         40,800
H	Financial advantages (disadvantage) (E-G)	$              -3,300	$             20,350	$          -8,320
2)
		Product A	Product B	Product C
	Sell at split off point	yes	no	yes
	process further	no	yes	no