ACCT 202 Study Guide - Final Guide: European Cooperation In Science And Technology
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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 $97,000 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 | $ | 5 | per pound | 10,000 | pounds | |
B | $ | 6 | per pound | 15,000 | 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 | $ | 45,000 | $ | 8 | per pound | |||||||
B | $ | 36,000 | $ | 11 | per pound | |||||||
C | $ | 14,000 | $ | 20 | per gallon | |||||||
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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 $335,000 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 | $ | 17.00 | per pound | 12,400 | pounds | |
B | $ | 11.00 | per pound | 19,400 | pounds | |
C | $ | 23.00 | per gallon | 3,600 | 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 | $ | 63,720 | $ | 21.80 | per pound |
B | $ | 91,120 | $ | 16.80 | per pound |
C | $ | 37,360 | $ | 30.80 | 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?