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Dorsey Company manufactures three products from a common input in a joint processing operation. Joint processing costs up to the split-off point total $355,000
Dorsey Company manufactures three products from a common input in a joint processing operation. Joint processing costs up to the split-off point total $355,000 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: Selling Price Product Quarterly Output A $21.00 per pound 13,200 pounds B $ 15.00 per pound 20,600 pounds $ 27.00 per gallon 4,400 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 Processing Costs $ 73,440 Selling Price $26.20 per pound Product A B $ 105,620 $ 46,000 $ 35.20 per gallon $ 21.20 per pound 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?
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