Reference no: EM132535967

Dorsey Company manufactures three products from a common input in a joint processing operation. Joint processing costs up to the split-off point total $330,000 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                    $16.00per pound        12,200pounds

B                      $10.00per pound     19,100pounds

C                    $22.00per gallon         3,400gallons

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                                         $61,390                       $20.70 per pound

B                                           $87,645                      $15.70 per pound

C                                              $35,300                      $29.70 per pound

Required:

Question 1. What is the financial advantage (disadvantage) of further processing each of the three products beyond the split-off point?

Question 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?