Exercise 10-7 Sell or Process Further [LO10-7]

Dorsey Company manufactures three products from a common input in a joint processing operation. Joint processing costs up to the split-off point total $96,000 per quarter. 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	$	4	per pound		13,000	pounds
B	$	5	per pound		18,000	pounds
C	$	11	per gallon		6,000	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	$	43,000		$	6	per pound
B	$	37,000		$	9	per pound
C	$	9,000		$	13	per gallon

Required:
a.	Compute the incremental profit (loss) for each product.

b.

Which product or products should be sold at the split-off point? (You may select more than one answer. Single click the box with a check mark for correct answers and double click to empty the box for the wrong answers.)

	Product A
	Product B
	Product C

c.

Which product or products should be processed further? (You may select more than one answer. Single click the box with a check mark for correct answers and double click to empty the box for the wrong answers.)

	Product A
	Product B
	Product C