Dorsey Company manufactures three products from a common input in a joint processing operation. Joint processing costs up to the split-off point total $370,000 per quarter. For financial reporting purposes, the company allocates these costs to the joint products based on 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 $ 24.00 per pound 13,800 pounds B $ 18.00 per pound 21,500 pounds C $ 30.00 per gallon 5,000 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: Product Additional Processing Costs Selling Price A $ 81,150 $ 29.50 per pound B $ 117,125 $ 24.50 per pound C $ 52,900 $ 38.50 per gallon Required: What is the financial advantage (disadvantage) of further processing each of the three products beyond the split-off point? Based on your analysis in requirement 1, which product or products should be sold at the split-off point and which 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 $370,000 per quarter. For financial reporting purposes, the company allocates these costs to the joint products based on 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 $ 24.00 per pound 13,800 pounds B $ 18.00 per pound 21,500 pounds C $ 30.00 per gallon 5,000 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: Product Additional Processing Costs Selling Price A $ 81,150 $ 29.50 per pound B $ 117,125 $ 24.50 per pound C $ 52,900 $ 38.50 per gallon Required: What is the financial advantage (disadvantage) of further processing each of the three products beyond the split-off point? Based on your analysis in requirement 1, which product or products should be sold at the split-off point and which should be processed further?
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
| Product | Selling Price | Quarterly Output | ||
|---|---|---|---|---|
| A | $ 24.00 | per pound | 13,800 | pounds |
| B | $ 18.00 | per pound | 21,500 | pounds |
| C | $ 30.00 | per gallon | 5,000 | 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:
| Product | Additional Processing Costs | Selling Price | |
|---|---|---|---|
| A | $ 81,150 | $ 29.50 | per pound |
| B | $ 117,125 | $ 24.50 | per pound |
| C | $ 52,900 | $ 38.50 | per gallon |
Required:
- What is the financial advantage (disadvantage) of further processing each of the three products beyond the split-off point?
- Based on your analysis in requirement 1, which product or products should be sold at the split-off point and which should be processed further?
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