Dorsey Company manufactures three products from a common input in a joint processing operation. Joint processing costs up to the split-off point total $360,000 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: Selling Price Product Quaterly Output A $ 22.00 per pound 13,400 pounds B $ 16.00 per pound 20,900 pounds C $ 28.00 per gallon 4,600 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 A Additional Processing Costs $ 75,970 Selling Price $ 27.30 per pound $ 22.30 per pound B $ 109,395 C $ 48,260 $ 36.30 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 $360,000 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: Selling Price Product Quaterly Output A $ 22.00 per pound 13,400 pounds B $ 16.00 per pound 20,900 pounds C $ 28.00 per gallon 4,600 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 A Additional Processing Costs $ 75,970 Selling Price $ 27.30 per pound $ 22.30 per pound B $ 109,395 C $ 48,260 $ 36.30 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 $360,000 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:
Selling Price
Product
Quaterly Output
A
$ 22.00 per pound
13,400 pounds
B
$ 16.00 per pound
20,900 pounds
C
$ 28.00 per gallon
4,600 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
A
Additional
Processing
Costs
$ 75,970
Selling Price
$ 27.30 per pound
$ 22.30 per pound
B
$ 109,395
C
$ 48,260
$ 36.30 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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