Dorsey Company manufactures three products from a common input in a joint processing operation. Joint processing costs up to the split-off point total $305,000 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 |
$ |
11.00 |
per pound |
11,200 |
pounds |
|
|
B |
$ |
5.00 |
per pound |
17,600 |
pounds |
|
|
C |
$ |
17.00 |
per gallon |
2,400 |
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 |
$ |
50,340 |
$ |
15.20 |
per pound |
|
B |
$ |
71,170 |
$ |
10.20 |
per pound |
|
C |
$ |
25,600 |
$ |
24.20 |
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?
What is the financial advantage (disadvantage) of further processing each of the three products beyond the split-off point? (Enter "disadvantages" as a negative value.)
requirement_content
requr_content_cntr
requirement_cntr
|
|||||||||
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?
requirement_content
requr_content_cntr
requirement_cntr
|
|||||||||||||
1) Calculate financial advantage (disadvantage):
| Product A | Product B | Product C | |
| Sale price after further processing | 15.20 | 10.20 | 24.20 |
| Sale price at split off point | 11 | 5 | 17 |
| Incremental sale price | 4.20 | 5.20 | 7.2 |
| Quantity | 11200 | 17600 | 2400 |
| Incremental sales revenue | 47040 | 91520 | 17280 |
| Incremental cost | -50340 | -71170 | -25600 |
| Financial advantage (disadvantage) | -3300 | 20350 | -8320 |
b) Analysis :
| Product A | Product B | Product C | |
| Sell at split off point | Yes | No | Yes |
| Process further | No | Yes | No |
Get Answers For Free
Most questions answered within 1 hours.