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The document describes a company that jointly processes three products from a common input. Total quarterly joint processing costs are $350,000. Costs are allocated to products based on their relative sales values at the split-off point. Product B has the highest incremental profit if further processed, so it should undergo additional processing while products A and C should be sold at the split-off point.

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Eevan Salazar
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3K views1 page

Answer

The document describes a company that jointly processes three products from a common input. Total quarterly joint processing costs are $350,000. Costs are allocated to products based on their relative sales values at the split-off point. Product B has the highest incremental profit if further processed, so it should undergo additional processing while products A and C should be sold at the split-off point.

Uploaded by

Eevan Salazar
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Download as DOCX, PDF, TXT or read online on Scribd
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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:

Quarterly
Product Selling Price Output
A $16 per pound 15,000 pounds
B $8 per pound 20,000 pounds
C $25 per pound 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:

Additional
Product Processing Costs Selling Price
A $63,000 $20 per pound
B $80,000 $13 per pound
C $36,000 $32 per gallon

Required:
1) Which product or products should be sold at the split-off point and which product or
products should be processed further? Show computations.

Answer:
1.
A B C
Selling price after further processing $20 $13 $32
Selling price at the split-off point  16   8  25
Incremental revenue per pound or gallon $ 4 $ 5 $ 7
Total quarterly output in pounds or gallons ×15,000 ×20,000 ×4,000

Total incremental revenue $60,000 $100,000 $28,000

Total incremental processing costs  63,000   80,000  36,000

Total incremental profit or loss $(3,000) $ 20,000 $(8,000)

Therefore, only product B should be processed further.

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