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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.

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
B $8 per pound 20,000
C $25 per gallon 4,000

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
Which product or products should be sold at the split-off point and which product or products should be processed further? Show Computations.
Analysis of sell or process further:
Contribution margin 177,000 80,000 64,000
Advantage of processing further



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