Exercise $13-7($Algo$)$ Sell or Process Further Decisions $[$LO$13-7]$

Dorsey Company manufactures three products from a common input in a joint processing operation. Joint processing costs up to the split$-$off point total $$370,000$ per quarter. For financial reporting purposes, the company allocates these costs to the joint products based on 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 $ $24\mathrm{.}00$ per pound $13,800$ pounds

B $ $18\mathrm{.}00$ per pound $21,500$ pounds

C $ $30\mathrm{.}00$ per gallon $5,000$ 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 Additional Processing Costs Selling Price

A $ $81,150$ $ $29\mathrm{.}50$ per pound

B $ $117,125$ $ $24\mathrm{.}50$ per pound

C $ $52,900$ $ $38\mathrm{.}50$ per gallon

Required:

What is the financial advantage $($disadvantage$)$ of further processing each of the three products beyond the split$-$off point?

Based on your analysis in requirement $1,$ which product or products should be sold at the split$-$off point and which should be processed further?