Exercise 13-7 (Algo) Sell or Process Further Decisions [LO13-7]

Dorsey Company manufactures three products from a common input in a joint processing operation. Joint processing costs up to the split-off point total $385,000 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	$ 27.00	per pound	14,400	pounds
B	$ 21.00	per pound	22,400	pounds
C	$ 33.00	per gallon	5,600	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	$ 89,220	$ 32.80	per pound
B	$ 129,170	$ 27.80	per pound
C	$ 60,160	$ 41.80	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?