Dorsey Company manufactures three products from a common input in a joint processing operation. Joint processing costsup to the split-off point total $315,000 per quarter. For financial reporting purposes, the company allocates these costs to thejoint products on the basis of their relative sales value at the split-off point. Unit selling prices and total output at the split-offpoint are as follows:Selling Price$ 13.00 per pound$ 7.00 per pound$ 19.00 per gallonQuarterly Output11,600 pounds18,200 pounds2,800 gallonsProductAВCEach product can be processed further after the split-off point. Additional processing requires no special facilities. Theadditional processing costs (per quarter) and unit selling prices after further processing are given below:AdditionalProcessingSelling Price$ 17.40 per pound$ 12.40 per pound$ 26.40 per gallonProductCosts$ 54,640$ 77,580$ 29,360AВRequired: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 productor products should be processed further?

Financial advantage (disadvantage): The financial advantage refers to a situation where the total…

the dvantage (disadvanta9e) of furt processing eyond the spiit-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?

the dvantage (disadvanta9e) of furt processing eyond the spiit-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?

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:
Selling Price
$ 13.00 per pound
$ 7.00 per pound
$ 19.00 per gallon
Quarterly Output
11,600 pounds
18,200 pounds
2,800 gallons
Product
A
В
C
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
Selling Price
$ 17.40 per pound
$ 12.40 per pound
$ 26.40 per gallon
Product
Costs
$ 54,640
$ 77,580
$ 29,360
A
В
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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