Dorsey Company manufactures three products from a common input in a joint processing operation. Joint processing costs up to the split-off point total $390,000 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

$

28.00

per pound

14,600

pounds

B

$

22.00

per pound

22,700

pounds

C

$

34.00

per gallon

5,800

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

$

91,990

$

33.90

per pound

B

$

133,305

$

28.90

per pound

C

$

62,660

$

42.90

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?