Dorsey Company manufactures three products from a common input in a joint processing operation. Joint processing costs up to the split-off point total $345,000 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: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:

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?

ProductABCSellingPrice$19.00perpound$13.00perpound$25.00pergallonQuarterlyoutput12,800pounds20,000pounds4,000gallons ProductABCAdditionalProcessingCostsSellingPrice$68,500$98,250$41,600$24.00perpound$19.00perpound$33.00pergallon