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 $395,000 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 14,800 pounds ProductSelling Price A 29.00 per pound 14 8 $ 23.08 per pound 23,000 pounds C $35.00 per gallon 6,000 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 Product Processin ost3s.o0 per pound Additionakselling Price 5 94, 800 $137,500 s 65,200 30.00 per $44.08 per gallon

Answer 1

Solution:-

Requirement 1:-

	Product A	Product B	Product C
Financial advantage (disadvantage) of further processing	(10,800)	23,500	(11,200)

Explanation:-

	Product A	Product B	Product C
Selling price after further processing	35	30	44
Selling price at the split-off point	29	23	35
Incremental revenue per pound or gallon	6	7	9
Total quarterly output in pounds or gallons	14,000	23,000	6,000
Total incremental revenue	84,000	161,000	54,000
Total incremental processing costs	94,800	137,500	65,200
Total incremental profit or loss	(10,800)	23,500	(11,200)

Requirement 2:-

	Product A	Product B	Product C
Sell at split off point	Yes		Yes
Process further		Yes