Reference no: EM132566401
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?