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 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	$ 21.00	per pound	13,200	pounds
B	$ 15.00	per pound	20,600	pounds
C	$ 27.00	per gallon	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	Additional Processing Costs	Selling Price
A	$ 73,440	$ 26.20	per pound
B	$ 105,620	$ 21.20	per pound
C	$ 46,000	$ 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?

For Part 2:

\begin{tabular}{|l|l|l|l|} \hline & Product A & Product B & Product C \\ \hline Sell at split-off point? & & & \\ \hline Process further? & & & \\ \hline \end{tabular}