Question

CALCULATOR PULLSCREEN PRINTER VERSION BACK NEXT Exercise 20-10 Stahl Inc. produces three separate products from a common process costing $100,600. Each of the products can be sold at the split-off point or can be processed further and then sold for a higher price. Shown below are cost and selling price data for a recent period. Sales Valus at Split-on Cost to Process Product 10 Product 12 Product 14 $59,400 15.100 54,100 5100,900 30,100 150,200 Sales Value after further Processing $191,000 34,200 214,400 Determine total net income if all products are sold at the split-off point Net income Determine total net income if all products are sold after further processing Net income

Answer 1

Solution:

1)

Net income = Product 10 Sale value at split-off point + Product 12 Sale value at split-off point + Product 14 Sale value at split-off point - Common process costs

=$59,400+$15,100+$54,300-$100,600

=$28,200

2)

Net income = Product 10 Sale value after further processing + Product 12 Sale value after further processing + Product 14 Sale value after further processing - Product 10 costs to process further - Product 12 costs to process further - Product 14 costs to process further - Common process costs

=191,000+34,200+214,000-100,900-30,100-150,200-100,600

=$57,400

3)

Incremental profit(loss) = Sales value after further processing - Sales value at split off point - Cost to process further.

Product	Incremental profit(loss)	Decision
Product 10	$30,700(191,00-100,900-59,400)	Process further
product 12	($11,000)($34,200-$30,100-$15,100)	Sell at split off
Product 14	$9,900($214,400-$150,200-$54,300)	Process further

Net income= $191,00+15,100+214,400-$100,900-$150,200-$100,600

=$68,800

The net income is increased by $11,400 ($68,800-$57,400)