Dorsey Company manufactures three products from a common input in a joint processing operation. Joint processing...
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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 $395,000 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: $ 29.00 per pound $23.00 per pound Quarterly Output 14,800 pounds Product A B $ 35.00 per gallon 23,000 pounds 6,000 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 A Additional Processing Costs $ 94,800 Selling Price $ 35.00 per pound B $ 137,500 $ 30.00 per pound $44.00 per gallon C Required: $ 65,200 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? Dorsey Company manufactures three products from a common input in a joint processing operation. Joint processing costs up to the split-off point total $395,000 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: $ 29.00 per pound $23.00 per pound Quarterly Output 14,800 pounds Product A B $ 35.00 per gallon 23,000 pounds 6,000 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 A Additional Processing Costs $ 94,800 Selling Price $ 35.00 per pound B $ 137,500 $ 30.00 per pound $44.00 per gallon C Required: $ 65,200 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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