Dorsey Company manufactures three products from a common input in a joint processing operation. Joint processing costs up to the split-off point total $94,000 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 |
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A | $ | 3 | per pound | 15,000 | pounds | |
B | $ | 5 | per pound | 20,000 | pounds | |
C | $ | 9 | per gallon | 7,000 | 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 | $ | 44,000 | $ |
5 |
per pound | |
B | $ | 36,000 | $ | 8 | per pound | |
C | $ | 11,250 | $ | 11 | per gallon | |
Required: | ||||||||||||||||||||||||||||||||||||
a. |
Compute the incremental profit (loss) for each product.
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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.) |
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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.) |
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