Wednesday 1 April 2015

Dorsey Company manufactures three products from a common input in a joint processing operation. Joint processing costs up to the split-off point total $95,000 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:

Dorsey Company manufactures three products from a common input in a joint processing operation. Joint processing costs up to the split-off point total $95,000 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 $ 11  per gallon   6,000  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 $ 36,000   $ 6
 per pound 
B $ 38,000   $ 9  per pound
C $ 9,000   $ 14  per gallon

 
Required:
a.
Compute the incremental profit (loss) for each product.

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