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

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Finance

Dorsey Company manufactures three products from a common inputin a joint processing operation. Joint processing costs up to thesplit-off point total $330,000 per quarter. For financial reportingpurposes, the company allocates these costs to the joint productson the basis of their relative sales value at the split-off point.Unit selling prices and total output at the split-off point are asfollows:
Product Selling Price Quarterly
Output
A $ 16.00 per pound 12,200 pounds
B $ 10.00 perpound 19,100 pounds
C $ 22.00 pergallon 3,400 gallons
Each product can be processed further after the split-off point.Additional processing requires no special facilities. Theadditional processing costs (per quarter) and unit selling pricesafter further processing are given below:
Product Additional
Processing Costs Selling
Price
A $ 61,390 $ 20.70 per pound
B $ 87,645 $ 15.70 per pound
C $ 35,300 $ 29.70 per gallon
Required:
1. What is the financial advantage (disadvantage) of furtherprocessing each of the three products beyond the split-offpoint?
2. Based on your analysis in requirement 1, which product orproducts should be sold at the split-off point and which product orproducts should be processed further?

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3.8 Ratings (652 Votes)

1 Calculation of financial advantage disadvantage of further processing Product A Product B Product C Selling price after processing 2070 1570 2970 Selling price at split off point See Answer

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Dorsey Company manufactures three products from a common inputin a joint processing operation. Joint processing costs up to thesplit-off point total $330,000 per quarter. For financial reportingpurposes, the company allocates these costs to the joint productson the basis of their relative sales value at the split-off point.Unit selling prices and total output at the split-off point are asfollows:ProductSelling PriceQuarterlyOutputA$16.00per pound12,200poundsB$10.00perpound19,100poundsC$22.00pergallon3,400gallonsEach product can be processed further after the split-off point.Additional processing requires no special facilities. Theadditional processing costs (per quarter) and unit selling pricesafter further processing are given below:ProductAdditionalProcessing CostsSellingPriceA$61,390$20.70per poundB$87,645$15.70per poundC$35,300$29.70per gallonRequired:1. What is the financial advantage (disadvantage) of furtherprocessing each of the three products beyond the split-offpoint?2. Based on your analysis in requirement 1, which product orproducts should be sold at the split-off point and which product orproducts should be processed further?

Product	Selling Price			Quarterly Output
A	$	16.00	per pound		12,200	pounds
B	$	10.00	perpound		19,100	pounds
C	$	22.00	pergallon		3,400	gallons

Product	Additional Processing Costs		Selling Price
A	$	61,390	$	20.70	per pound
B	$	87,645	$	15.70	per pound
C	$	35,300	$	29.70	per gallon