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Which product or products should be sold

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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 $325,000 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

$15.00 per pound

12,000 pounds

B

$9.00 per pound

18,800 pounds

C

$21.00 per gallon

3,200 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

$59,100

$19.60 per pound

B

$84,230

$14.60 per pound

C

$33,280

$28.60 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: EM133039956

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