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Exercise 13-6 Sell or Process Further

Exercise 13-6 Sell or Process Further
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Exercise 13-6 Sell or Process Further (LO6)

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 Selling Price
Processing Costs
A $63,000 $20 per pound
B $80,000 $13 per pound
C $36,000 $32 per gallon

(a) Compute the incremental profit (loss) for each product. (Negative amounts should be indicated by a minus sign. Omit the "$" sign in your response.)

(b) Which product or products will be sold at the split-off point? (Select all that apply.)



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