Reference no: EM132956076
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:
Problem 1. What is the financial advantage (disadvantage) of further processing each of the three products beyond the split-off point?
Problem 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?
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