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 $300,000 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 $300,000 per quarter. For financial reporting purposes, the company allocates these costs to the joint products on the basis of their relative sales value at the split-off point. Unit selling prices and total output at the split-off point are as follows:
ProductSelling PriceQuarterly OutputA$ 10.00per pound11,000poundsB$ 4.00per pound17,300poundsC$ 16.00per gallon2,200gallons
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:
ProductAdditional Processing CostsSelling PriceA$ 48,250$ 14.10per poundB$ 68,055$ 9.10per poundC$ 23,780$ 23.10per gallon
Required:
1. What is the financial advantage (disadvantage) of further processing each of the three products beyond the split-off point?
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