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 $330,000 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 | $ | 16.00 | per pound | 12,200 | pounds | |
| B | $ | 10.00 | per pound | 19,100 | pounds | |
| C | $ | 22.00 | per gallon | 3,400 | 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 | $ | 61,390 | $ | 20.70 | per pound |
| B | $ | 87,645 | $ | 15.70 | per pound |
| C | $ | 35,300 | $ | 29.70 | 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= $(4050).
The financial advantages of processing Product B beyond the split-off point is = $21225.
The financial (disadvantages) of processing Product C beyond the split-off point is=$(9120).
Explanation-
| 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 | 12200 pounds*$16.00 per pound = $195200 | 12200 pounds*$20.70 per pound = $252540 | 57340 | 61390 | -4050 |
| B | 19100 pounds*$10.00 per pound = $191000 | 19100 pounds*$15.70 per pound = $299870 | 108870 | 87645 | 21225 |
| C | 3400 gallons*$22 per gallon = $74800 | 3400 gallons*$29.70 per gallon = $100980 | 26180 | 35300 | -9120 |
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...
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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 $335,000 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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Product
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Output
A
$
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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.
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19,000
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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.
Unit selling prices and total output at the split-off point are as
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Product
Selling Price
Quarterly
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A
$
16
per pound
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$
8
per...
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.
Unit selling prices and total output at the split-off point are as
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Product
Selling Price
Quarterly
Output
A
$
26.00
per pound
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pounds
B
$
20.00
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on the basis of their relative sales value at the split-off point.
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Quarterly
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