Question
In: Accounting
Dorsey Company manufactures three products from a common input in a joint processing operation. Joint processing...
Dorsey Company manufactures three products from a common input in a joint processing operation. Joint processing costs up to the split-off point total $380,000 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 | $ | 26.00 | per pound | 14,200 | pounds | |
| B | $ | 20.00 | per pound | 22,100 | pounds | |
| C | $ | 32.00 | per gallon | 5,400 | 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 | $ | 86,490 | $ | 31.70 | per pound |
| B | $ | 125,095 | $ | 26.70 | per pound |
| C | $ | 57,700 | $ | 40.70 | 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?
Solutions
Expert Solution
Answer:-1)-The financial (disadvantages) of processing Product A beyond the split-off point is= $(5550).
The financial advantages of processing Product B beyond the split-off point is=$22975.
The financial (disadvantages) of processing Product C beyond the split-off point is=$(10720).
Explanation-
| Doresy Company | |||||
| Statement Of Financial advantage (disadvantage) | |||||
| Product | Sale value at Split-Off-Point | Sale value of processed product | Incremental sale | Cost to further process | Incremental profit/(loss) |
| $ | $ | $ | $ | $ | |
| (a) | (b) | (c=b-a) | (d) | (e=c-d) | |
| A | 14200 pounds*$26.00 per pound = $369200 | 14200 pounds*$31.70 per pound = $450140 | 80940 | 86490 | -5550 |
| B | 22100 pounds*$20.00 per pound = $442000 | 22100 pounds*$26.70 per pound = $590070 | 148070 | 125095 | 22975 |
| C | 5400 gallons*$32 per gallon = $172800 | 5400 gallons*$40.70 per gallon = $219780 | 46980 | 57700 | -10720 |
2)-Product A & C should be sold at split-off point and product B should be processed further.
ekkarill92 answered 2 years agoRelated Solutions
Dorsey Company manufactures three products from a common input in a joint processing operation. Joint processing...
Dorsey Company manufactures three products from a common input
in a joint processing operation. Joint processing costs up to the
split-off point total $350,000 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.
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Dorsey Company manufactures three products from a common input in a joint processing operation. Joint processing...
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in a joint processing operation. Joint processing costs up to the
split-off point total $380,000 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.
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Dorsey Company manufactures three products from a common input in a joint processing operation. Joint processing...
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in a joint processing operation. Joint processing costs up to the
split-off point total $350,000 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.
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