Compute the incremental profit for each product

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Question - Dorsey Company manufactures three products from a common in put in a joint processing operation. Joint processing costs up to the split-off point total $96,000 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:

Product

Selling Price

Quarterly Output

A

$ 4 per pound

13,000 pounds

B

$ 5 per pound

18,000 pounds

C

$9 per pound

7,000 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

Additional Processing Costs

Selling Price

A

$43,000

$6 per pound

B

$37,000

$9 per pound

C

$17,500

$12 per gallon

Required -

a. Compute the incremental profit (loss) for each product.

b. Which product or products should be sold at the split-off point?

c. Which product or products should be processed further?

Reference no: EM131766278

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