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 $350,000 per quarter. 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   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:

a. Compute the incremental profit (loss) for each product.

b. Which product or products should be sold at the split-off point? (You may select more than one answer. Single click the box with a check mark for correct answers and double click to empty the box for the wrong answers.)

Product A
Product B
Product C

c. Which product or products should be processed further? (You may select more than one answer. Single click the box with a check mark for correct answers and double click to empty the box for the wrong answers.)

Product A
Product B
Product C

Answer 1