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EXERCISE 137 Sell or Process Further Decisions L01 37 Dorsey Company manufactures three products from a common input in a joint processing operation. Joint processing
EXERCISE 137 Sell or Process Further Decisions L01 37 Dorsey Company manufactures three products from a common input in a joint processing operation. Joint processing costs up to the split-off point total $350,000 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 .................... $16 per pound 15,000 pounds B .................... $8 per pound 20,000 pounds C .................... $25 per gallon 4,000 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: Additional Selling Product Processing Costs Price A ................. $63,000 $20 per pound B ................. $80,000 $13 per pound C ................. $36,000 $32 per gallon Required: 1. What is the financial advantage (disadvantage) of further processing each of the three prod- ucts 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
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