Dorsey Company manufactures three products from a common input in a joint processing operation. Joint processing costs up to the split-off point total $385,000 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 $ 27.00 per pound 14,400 pounds B $ 21.00 per pound 22,400 pounds C $ 33.00 per gallon 5,600 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 Additional Processing Costs Selling Price A $ 89,220 $ 32.80 per pound B $ 129,170 $ 27.80 per pound C $ 60,160 $ 41.80 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
| Product | Selling Price | Quarterly Output | ||
|---|---|---|---|---|
| A | $ 27.00 | per pound | 14,400 | pounds |
| B | $ 21.00 | per pound | 22,400 | pounds |
| C | $ 33.00 | per gallon | 5,600 | 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 | Additional Processing Costs | Selling Price | |
|---|---|---|---|
| A | $ 89,220 | $ 32.80 | per pound |
| B | $ 129,170 | $ 27.80 | per pound |
| C | $ 60,160 | $ 41.80 | 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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