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Dorsey Company manufactures three products from a common input in a joint processing operation

Accounting

Dorsey Company manufactures three products from a common input in a joint processing operation. Joint processing costs up to the split-off point total $380,000 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 A B C Selling Price $ 26.00 per pound $ 20.00 per pound $ 32.00 per gallon Quarterly Output 14,200 pounds 22,100 pounds 5,400 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: Additional Product Processing Costs A $ 86,490 B $125,095 ? $ 57,700 Selling Price $31.70 per pound $26.70 per pound $40.70 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? Complete this question by entering your answers in the tabs below. Required 1 Required 2 What is the financial advantage (disadvantage) of further processing each of the three products beyond the split-off point? (Enter "disadvantages" as a negative value.) Product A Product B Product C Financial advantage (disadvantage) of further processing < Required 1 Required 2 > Complete this question by entering your answers in the tabs below. Required 1 Required 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? Product A Product B Product C Sell at split-off point? Process further? < Required 1 Required 2 >

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Computation of financial adavantage / disadvantage of further processing
Particulars Product A Product B Product C
Details Amount Details Amount Details Amount
Sale Value after further processing 14200*31.70 $450,140.00 22100*26.70 $590,070.00 5400*40.70 $219,780.00
Less: Sale value at split off Point 14200*26 $369,200.00 22100*20 $442,000.00 5400*32 $172,800.00
             
Incremental Revenue - Further Processing   $80,940.00   $148,070.00   $46,980.00
Less: Further Processing Cost   $86,490.00   $125,095.00   $57,700.00
             
Financial advantage (Disadvantage) for further processing   -$5,550.00   $22,975.00   -$10,720.00

As product A & C is showing financial disadvantage if they are further processed, hence these products should be sold at split off point. Further Product B is showing financial advantage for further processing, hence same should be further processed.

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