Reference no: EM132587757

Dorsey Company manufactures three products from a common input in a joint processing operation. Joint processing costs up to the split-off point total $320,000 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                   $14.00per pound        11,800pounds

B                     $8.00per pound        18,500pounds

C                 $20.00per gallon              3,000gallons

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:

Additional Selling

Product         Processing           Costs Price

A                  $56,850      $18.50 per pound

B                 $80,875       $13.50 per pound

C                  $31,300        $27.50 per gallon

Required:

Question 1. What is the financial advantage (disadvantage) of further processing each of the three products beyond the split-off point?

Question 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?