Question

Dorsey Company manufactures three products from a common input in a joint processing operation. Joint processing costs up toRequired 1 Required 2 What is the financial advantage (disadvantage) of further processing each of the three products beyondRequired 1 Required 2 Based on your analysis in requirement 1, which product or products should be sold at the split-off poin

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Answer #1

1) Incremental analysis

Product A Product B Product C
Selling price after further processing 20 13 32
Selling price at split off 16 8 25
Incremental profit 4 5 7
Quantity 15000 20000 4000
Incremental revenue 60000 100000 28000
Incremental cost -63000 -80000 -36000
Incremental profit (loss) -3000 20000 -8000

Analysis

Product A Product B Product C
Sell at split off Yes No Yes
Process further No Yes No
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