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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 $310,000-per quarter.
Dorsey Company manufactures three products from a common input in a joint processing operation. Joint processing costs up to the split-off point total $310,000-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 A B C Product Selling Price $12.00 per pound $6.00 per pound $18.00 per gallon 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: ABC Additional Processing Costs Quarterly Output 11,400 pounds 17,900 pounds 2,600 gallons $52,470 $74,345 $27,460 Selling Price $16.30 per pound $11.30 per pound $25.30 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? Complete this question by entering your answers in the tabs below.
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