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 $$315,000$ 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 $ $13\mathrm{.}00$ per pound $11,600$ pounds

B $ $7\mathrm{.}00$ per pound $18,200$ pounds

C $ $19\mathrm{.}00$ per gallon $2,800$ 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 $ $54,640$ $ $17\mathrm{.}40$ per pound

B $ $77,580$ $ $12\mathrm{.}40$ per pound

C $ $29,360$ $ $26\mathrm{.}40$ 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?