Dorsey Company manufactures three products from a common inp

Dorsey Company manufactures three products from a common input in a joint processing operation. Joint processing costs up to the split-off point total $92,000 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: Quarterly Output Product Selling Price 3 per pound 19,000 pounds $ 4 per pound 24,000 pounds gallon 7,000 gallons $ 9 per 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: Additional Processing Costs S 41,000 40,000 S 12,000 Product Selling Price $ 4 per pound $7 per pound $11 per gallon Required a. Compute the incremental profit (loss) for each product. ProductA Product B Product C Selling price after further processing Selling price at the split-off point Incremental revenue per pound or gallon Total quarterly output in pounds or gallons Total incremental revenue Total incremental processing costs Total incremental profit or loss 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 2Product 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 BB Product C

Solution

(a) Incremental Profit/Loss for each product:-

Product A

Product B

Product C

Selling Price after further processing

4

7

11

SP at the split off point

3

4

9

Incremental revenue per pound/gallon

1

3

2

Total Quarterly output in pounds/gallon

19000

24000

7000

Total Incremental Revenue

19000

72000

14000

Total Incremental processing cost

41000

40000

12000

Total Incremental Profit/Loss

(22000)

32000

2000

(b) Product A should be sold at split off point

(c) Product B & Product C should be processed further

	Product A	Product B	Product C
Selling Price after further processing	4	7	11
SP at the split off point	3	4	9
Incremental revenue per pound/gallon	1	3	2
Total Quarterly output in pounds/gallon	19000	24000	7000
Total Incremental Revenue	19000	72000	14000
Total Incremental processing cost	41000	40000	12000
Total Incremental Profit/Loss	(22000)	32000	2000