Dorsey Company manufactures three products from a common input in a joint processing operation. Joint processing costs up to the
split-off point total $340,000 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 $18.00 per pound 12,600 pounds
B $12.00 per pound 19,700 pounds
C $24.00 per gallon 3,800 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 $66,090 $22.90 per pound
B $94,655 $17.90 per pound
C $39,460 $31.90 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?
Product Selling Price Quarterly Output
A $18.00 per pound 12,600 pounds
B $12.00 per pound 19,700 pounds
C $24.00 per gallon 3,800 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 $66,090 $22.90 per pound
B $94,655 $17.90 per pound
C $39,460 $31.90 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?
2 answers:
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Answer:
- Education and Health Services
- Professional and Business Services
- Leisure and Hospitality Services
Explanation:
The graph shown below works by assigning a longer bar to the fields that are the fastest growing. The field that has the longest bar is therefore the fastest growing and this is the Education and Health Services sector.
The Professional and Business Services area has the second longest bar so this is the second fastest growing. In third place we have the Leisure and Hospitality services area.
