Dorsey Company manufactures three products from a common input
in a joint processing operation. Joint processing costs up to the
splitoff point total $ 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 splitoff point.
Unit selling prices and total output at the splitoff point are as
follows:ProductSelling PriceQuarterly
OutputA$per poundpoundsB$per poundpoundsC$per gallongallonsEach product can be processed further after the splitoff point.
Additional processing requires no special facilities. The
additional processing costs per quarter and unit selling prices
after further processing are given below:ProductAdditional
Processing CostsSelling
PriceA$$per poundB$$per poundC$$per gallonRequired: What is the financial advantage
disadvantage of further processing each of the three products
beyond the splitoff point? Based on your analysis in
requirement which product or products should be sold at the
splitoff point and which product or products should be processed
further?
