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 $96,000 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 $ 3 per pound 18,000 pounds B $ 4 per pound 23,000 pounds C $ 16 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 $ 44,000 $ 4 per pound B $ 39,000 $ 7 per pound C $ 13,250 $ 20 per gallon  

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

	product A	product B	product C
selling price after further processing	4	7	20
selling price at the split off point	(3)	(4)	(16)
incremental revenue per pound or gallon	1	3	4
total quarterly output in pounds or gallons	18,000	23,000	4,000
total incremental revenue	18,000	69,000	16,000
total incremental processing costs	(44,000)	(39,000)	(13,250)
total incremental profit or loss	(26,000)	30,000	2,750

b.Product A

(product A should be sold off at split off point, since there is incremental loss).

c.Product B

Product C

(Product B and product C should be processed further, since there is incremental profit).