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Homework answers / question archive / Dorsey Company manufactures three products from a common input in a joint processing operation
Dorsey Company manufactures three products from a common input in a joint processing operation. Joint processing costs up to the split-off point total 593,000 per quarter. 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 S 5 per pound S 5 per pound S 13 per gallon Quarterly Output 12,000 pounds 17.000 pounds 5,000 gallons B ? 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: Additional Product Processing Costs Selling Price A $ 42,000 $ 7 per pound B $ 35,000 $ 9 per pound ? $ 13,000 $ 16 per gallon Required: a. Compute the incremental profit (oss) for each product. Product A Product B Product C Selling price after further processing Selling price at the split-off point Incremental revenue per pound or gallon Total quarterly output in pounds or gallons Total incremental revenue Total incremental processing costs Total incremental profit or loss
b. Which product or products should be sold at the split-off point? (You may select more than one answer. Single click the box with a check mark for correct answers and double click to empty the box for the wrong answers.) 2 Product A Product B Product C c. Which product or products should be processed further? [You may select more than one answer. Single click the box with a check mark for correct answers and double click to empty the box for the wrong answers.)
| Product A | Product B | Product C | |
| Selling price after further processing | $7 | $9 | $16 |
| Selling price at the split of point | $5 | $5 | $13 |
| Incremental revenue per pound or gallon | $2 | $4 | $3 |
| Total Quaterly output in pound or gallon | 12,000 | 17,000 | 5,000 |
| Total incremental revenue | $24,000 | $68,000 | $15,000 |
| Total incremental processing cost | $42,000 | $35,000 | $13,000 |
| Total incremental profit or loss | ($18,000) | $33,000 | $2,000 |
b. Product A
If product A is further processed it leads to a reduction of profit by $18,000 as compared to profit at the split of point.
c. Product B
Product C
Further processing of products A and B will lead to an increase in profit by $33,000 and by $2,000 as compared to profits at the spilt of point.
