Exercise 11-7 (Algo) Sell or Process Further Decisions [LO11-7] Dorsey Company manufactures three products from a common input in a joint processing operation. Joint processing costs up to the split-off point total $355,000 per quarter. For financial reporting purposes, the company allocates these costs to the joint products or 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: Selling Price Product A $ 21.00 per pound B $15.00 per pound C Quarterly Output $ 27.00 per gallon 13,200 pounds 20,600 pounds 4,400 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 A B C Additional Processing Costs $ 73,440 $ 105,620 $ 46,000 Selling Price $26.20 per pound $ 21.20 per pound $35.20 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? Thalassines Kataskeves, S.A., of Greece makes marine equipment. The company has been experiencing losses on its bilge pump product line for several years. The most recent quarterly contribution format income statement for the bilge pump product line follows: Thalassines Kataskeves, S.A. Income Statement-Bilge Pump For the Quarter Ended March 31 Sales Variable expenses: Variable manufacturing expenses Sales commissions Shipping Total variable expenses Contribution margin Fixed expenses: Advertising (for the bilge pump product line) Depreciation of equipment (no resale value) General factory overhead Salary of product-line manager Insurance on inventories Purchasing department Total fixed expenses Net operating loss "Common costs allocated on the basis of machine-hours. +Common costs allocated on the basis of sales dollars. $470,000 $137,000 48,000 23,000 208,000 262,000 25,000 102,000 32,000* 125,000 12,000 46,00et 342,000 $ (80,000) Discontinuing the bilge pump product line would not affect sales of other product lines and would have no effect on the company's total general factory overhead or total Purchasing Department expenses. Required: What is the financial advantage (disadvantage) of discontinuing the bilge pump product line? Exercise 11-14 (Algo) Identification of Relevant Costs [LO11-1] Kristen Lu purchased a used automobile for $19,300 at the beginning of last year and incurred the following operating costs: Depreciation ($19,300 + 5 years) Insurance Garage rent Automobile tax and license Variable operating cost $ 3,868 $ 2,100 $1,100 $ 540 $ 0.87 per mile The variable operating cost consists of gasoline, oil, tires, maintenance, and repairs. Kristen estimates that, at her current rate of usage, the car will have zero resale value in five years, so the annual straight-line depreciation is $3,860. The car is kept in a garage for a monthly fee. Required: 1. Kristen drove the car 19,000 miles last year. Compute the average cost per mile of owning and operating the car. (Round your answers to 2 decimal places.) Average fixed cost per mile Variable operating cost per mile Average cost per mile $ 0.00 2. Kristen is unsure about whether she should use her own car or rent a car to go on an extended cross-country trip for two weeks during spring break. What costs above are relevant in this decision? (You may select more than one answer. Single click the box with the question mark to produce a check mark for a correct answer and double click the box with the question mark to empty the box for a wrong answer. Any boxes left with a question mark will be automatically graded as incorrect.)