What is the financial advantage of further processing

Reference no: EM133659657

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 $365,000 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 $ 23.00 per pound 13,600 pounds
B $ 17.00 per pound 21,200 pounds
C $ 29.00 per gallon 4,800 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 $ 78,540 $ 28.40 per pound
B $ 113,230 $ 23.40 per pound
C $ 50,560 $ 37.40 per gallon

Required:

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

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: EM133659657

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