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What is the financial advantage of further processing

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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 $360,000 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 $22.00 per pound 13,400 pounds

B $16.00 per pound 20,900 pounds

C $28.00 per gallon 4,600 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 $75,970 $27.30 per pound

B $109,395 $22.30 per pound

C $48,260 $36.30 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?

Reference no: EM132566401

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