Question

Dorsey Company manufactures three products from a common input in a joint processing operation. Joint processing costs up to the split-off point total $350,000 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 $16 per pound 15,000 pounds
B $8 per pound  20,000 pounds
C $25 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 $63,000 $20 per pound
B $80,000 $13 per pound
C $36,000 $32 per gallon

Required:
Which product or products should be sold at the split-off point and which product or products should be processed further?

Answer 1

The incremental selling price for product 1 is 60,000, product 2 is 100000 and product 3 is 28,000.

Sell at split off for product 1 is Yes and product 2 is No and product 3 is Yes.

Step-by-step explanation:

Here,