Question

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Exercise 20-10 (Part Level Submission) Stahl Inc. produces three separate products from a common process costing $100,400. 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 Value at Split-Off Point Cost to Process Further Sales Value after Further Processing Product 10 $60,300 $100,200 $190,700 Product 12 15,500 29,600 34,000 Product 14 54,100 149,900 215,200

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x Your answer is incorrect. Try again. Determine total net income if all products are sold at the split-off point. Net Income x Your answer is incorrect. Try again. Determine total net income if all products are sold after further processing. Net Income x Your answer is incorrect. Try again. Calculate incremental profit/(loss) and determine which products should be sold at the split-off point and which should be processed further. (Enter negative amounts using either a negative sign preceding the number e.g. -45 or parentheses e.g. (45).) Product Incremental profit (loss) Decision Product 10 Product 121 Product 14 x Your answer is incorrect. Try again. Determine total net income using the results from previous part. Net income Is the net income different from that determined in part (b)? net income is by $

Answer 1

Part a	Computation of net income at split-off point
		Prodcut 10	Prodcut 12	Prodcut 14	Total
	Sales value at split-off point	$60,300	$15,500	$54,100	$1,29,900
	Less:Joint cost				$1,00,400
	Net Income				$29,500
Part b	Computation of net income after further processing
		Prodcut 10	Prodcut 12	Prodcut 14	Total
	Sales value after further processing	$1,90,700	$34,000	$2,15,200	$4,39,900
	Less:Joint cost				$1,00,400
	Less:Additional cost	$1,00,200	$29,600	$1,49,900	$2,79,700
	Net Income				$59,800
Part c	Computation of Incremental profit
		Prodcut 10	Prodcut 12	Prodcut 14
	Incremental Revenue	$1,30,400	$18,500	$1,61,100
	Less:Incremental costs	$1,00,200	$29,600	$1,49,900
	Incremental Profit/(Loss)	$30,200	-$11,100	$11,200
		Incremental Profit/(Loss)	Decision
	Prodcut 10	$30,200	Sale after Further processing
	Prodcut 12	-$11,100	Sales at split-off point
	Prodcut 14	$11,200	Sale after Further processing
Part d	Computation of net income based on Incremental approach
		Prodcut 10	Prodcut 12	Prodcut 14	Total
	Incremental Profit/(Loss)	$30,200	-$11,100	$11,200	$30,300
	Less:Joint cost				100400
	Net Income				-$70,100
	Yes the Net income as per partd d is lower than the Net income as per part b by $129,900($70,100+59,800)