Question - Dorsey Company manufactures three products from a common in put in a joint processing operation. Joint processing costs up to the split-off point total $96,000 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
|
$ 4 per pound
|
13,000 pounds
|
|
B
|
$ 5 per pound
|
18,000 pounds
|
|
C
|
$9 per pound
|
7,000 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:
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Product
|
Additional Processing Costs
|
Selling Price
|
|
A
|
$43,000
|
$6 per pound
|
|
B
|
$37,000
|
$9 per pound
|
|
C
|
$17,500
|
$12 per gallon
|
Required -
a. Compute the incremental profit (loss) for each product.
b. Which product or products should be sold at the split-off point?
c. Which product or products should be processed further?