Dorsey Company manufactures three products from a common input in a joint processing operation. Joint processing costs
Question:
Product ________________ Selling Price _______ Quarterly Output
A . . . . . . . . . . . . . . . . . . . $16 per pound . . . . . . . . 15,000 pounds
B . . . . . . . . . . . . . . . . . . . . $8 per pound . . . . . . . . 20,000 pounds
C . . . . . . . . . . . . . . . . . . . $25 per gallon . . . . . . . . . . 4,000 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 . . . . . . . . . . . . . . . . . . . . . $63,000 . . . . . . . . . . . . . . . . . . . . $20 per pound
B . . . . . . . . . . . . . . . . . . . . . $80,000 . . . . . . . . . . . . . . . . . . . . $13 per pound
C . . . . . . . . . . . . . . . . . . . . . $36,000 . . . . . . . . . . . . . . . . . . . . $32 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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Related Book For
Managerial Accounting
ISBN: 978-1259307416
16th edition
Authors: Ray Garrison, Eric Noreen, Peter Brewer
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