Question

*Exercise 12-10 Stahl Inc. produces three separate products from a common process costing $100,000. 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. Product 10 Product 12 Product 14 Sales Value at Split-Off Point $60,000 15,000 55,000 Cost to Process Further $100,000 30,000 150,000 Sales Value after Further Processing $190,000 35,000 215,000 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 incomes 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).) Incremental profit (loss) Decision Product Product 10 Product 12 Product 14 Determine total net income using the results from previous part. Net incomes Is the net income different from that determined in part (b)? net income is by $ Question Attempts: 0 of 3 used

Answer 1

a	Net income if all products are sold at split-off point:
				$	$
	Sales value at split-off point
	Product 10			60000
	Product 12			15000
	Product 14			55000	130000
	Less: Joint costs				100000
	Net income				30000
b	Net income if all products are sold after further processing:
				$	$
	Sales value after further processing
	Product 10			190000
	Product 12			35000
	Product 14			215000	440000
	Less:
	Joint costs			100000
	Cost to process further
	Product 10			100000
	Product 12			30000
	Product 14			150000	380000
	Net income				60000
c	Incremental profit/(loss):
					Product 10	Product 12	Product 14
	Sales value after further processing				190000	35000	215000
	Less: sales value at split-off point				60000	15000	55000
	Incremental revenue				130000	20000	160000
	Less:Cost to process further				100000	30000	150000
	Incremental profit/(loss)				30000	-10000	10000
	Decision:
	Based on results from the previous table.Product 10& 14 can be sold after further processing since they are giving incremental profit
	Product 12 can be sold at split-off point since it gives incremental loss
d	Net income
				$	$
	Sales value
	Product 10			190000
	Product 12			15000
	Product 14			215000	420000
	Less:
	Joint costs			100000
	Cost to process further
	Product 10			100000
	Product 12			0
	Product 14			150000	350000
	Net income				70000
e	Yes	net income is Increased by $ 10000
	Increase in net income=70000-60000=$ 10000
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