Answered: Dorsey Company manufactures three…

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Question

Dorsey Company manufactures three products from a common input in a joint processing operation. Joint processing costs up to the split-off point total $315,000 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	$ 13.00	per pound	11,600	pounds
B	$ 7.00	per pound	18,200	pounds
C	$ 19.00	per gallon	2,800	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	$ 54,640	$ 17.40	per pound
B	$ 77,580	$ 12.40	per pound
C	$ 29,360	$ 26.40	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?

Product
A
B
C
Processing
Costs
$ 54,640
$ 77,580
$ 29,360
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?
Selling Price
$17.40 per pound
$ 12.40 per pound
$26.40 per gallon
Complete this question by entering your answers in the tabs below.
Required 1 Required 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?
Sell at split-off point?
Process further?
Product A
Product B
Product C

Product
ABC
Processing
Costs
$ 54,640
$ 77,580
$ 29,360
Selling Price
$17.40 per pound
$ 12.40 per pound
$26.40 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?
Complete this question by entering your answers in the tabs below.
Required 1 Required 2
What is the financial advantage (disadvantage) of further processing each of the three products beyond the split-off point?
(Do not round your intermediate calculations. Enter "disadvantages" as a negative value.)
Financial advantage (disadvantage) of further processing
Product A
Product B
Product C

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Decision to Sell before or after additional processing

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