Question

Riverbed 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 Value at Split-Off Point Cost to Process Further Sales Value after Further Processing Product 10 $59,400 $100,900 $191,000 Product 12 15,100 30,100 34,200 Product 14 54,300 150,200 214,400

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 $

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 $ Should be sold at the split-off pointShould be processed further Product 12 $ Should be sold at the split-off pointShould be processed further Product 14 $ Should be sold at the split-off pointShould be processed further

Determine total net income using the results from previous part. Net income $ Is the net income different from that determined in part (b)? YesNo , net income is decreasingincreasing by $

Answer 1

	Determine total net income if all products are sold at the split-off point.
	= Sale Value At Split Of Point - Joint Cost
	=($59400+15100+54300) -100600
	=$28200
	Determine total net income if all products are sold after further processing.
	= Sale value after further processing - Further processing cost - joint cost
	=(191000+34200+214400) - (100900+30100+150200)-100600
	=$57800
	Calculate incremental profit/(loss) and determine which products should be sold at the split-off point and which should be processed further.
	Product	Incremental Profit	Decision
	Product 10	$                                         30,700	Should be processed further
		($191000-100900-59400)
	Product 12	$                                       -11,000	Should be sold at the split-off point
		($34200-30100-15100)
	Product 14	$                                           9,900	Should be processed further
		($214400-150200-54300)
	Determine total net income using the results from the previous part.
	Sale Value
	Product 10		191000
	Product 12		15100
	Product 114		214400
	Total		420500
	Less:
	Further process cost of product 10 and 14		251100
	Less: Joint Cost		100600
	Net Income		68800
	Is the net income different from that determined in part (b)?
	Yes
	increasing
	by $ (68800-57800) = $11000