Dorsey Company manufactures three products from a common input in a joint processing operation. Joint processing costs up to the split-off point total $325,000 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 $ 15.00 per pound 12,000 pounds B $ 9.00 per pound 18,800 pounds C $ 21.00 per gallon. 3,200 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 Processing Costs Product A $ 59,100 B $ 84,230 Selling Price $ 19.60 per pound $14.60 per pound C $ 33,280 $ 28.60 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?
Dorsey Company manufactures three products from a common input in a joint processing operation. Joint processing costs up to the split-off point total $325,000 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 $ 15.00 per pound 12,000 pounds B $ 9.00 per pound 18,800 pounds C $ 21.00 per gallon. 3,200 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 Processing Costs Product A $ 59,100 B $ 84,230 Selling Price $ 19.60 per pound $14.60 per pound C $ 33,280 $ 28.60 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?
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Transcribed Image Text:Dorsey Company manufactures three products from a common input in a joint processing operation. Joint processing costs up to the
split-off point total $325,000 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
$ 15.00 per pound
12,000 pounds
B
$ 9.00 per pound
18,800 pounds
C
$ 21.00 per gallon.
3,200 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
Processing
Costs
Product
A
$ 59,100
B
$ 84,230
Selling Price
$ 19.60 per pound
$14.60 per pound
C
$ 33,280
$ 28.60 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?
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