Business, 02.06.2020 00:01 12huskiesmidnight
Dorsey Company manufactures three products from a common input in a joint processing operation. Joint processing costs up to the split-off point total $335,000 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 Quarterly Output
A $17.00 per pound 12,400 pounds
B $11.00 per pound 19,400 pounds
C $23.00 per gallon 3,600 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 Additional Processing Costs Selling Price
A $63,720 $21.80 per pound
B $91,120 $16.80 per pound
C $37,360 $30.80 per gallon
Required:
a. What is the financial advantage (disadvantage) of further processing each of the three products beyond the split-off point?
b. 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?
c. What is the financial advantage (disadvantage) of further processing each of the three products beyond the split-off point?
Answers: 2
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