Question
Dorsey Company manufactures three products from a common input in a joint processing operation. Joint processing costs up to the split-off point total $330,000 per
Dorsey Company manufactures three products from a common input in a joint processing operation. Joint processing costs up to the split-off point total $330,000 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 $ 16.00 per pound 12,200 pounds B $ 10.00 per pound 19,100 pounds C $ 22.00 per gallon 3,400 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: 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 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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