Question

Stahl Inc. produces three separate products from a common process costing $100,700. 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 $59,100 16,000 54,000 Product 10 Product 12 Product 14 Cost to Process Further $100,200 30,500 149,800 Sales Value after Further Processing $189,900 35,000 215,300 Determine total net income if all products are sold at the split-off point. Net income $ 28900 e Textbook and Media Determine total net income if all products are sold after further processing. Net income $ 59500 eTextbook and Media 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).) Decision Product Incremental profit (loss) Product 10 $ Should be processed further Product 12 $ Should be sold at the split-off point → Product 14 $ Should be processed further

Answer 1

1.) Net income if all sold at split off point :-

= Total sales value at split off - total cost at split off

= (59,100 + 16,000 + 54,000) - 100,700

= $28,400

2.) Net income if all sold after further processing :-

= Total sales value after processing - total cost after processing

= (189,900 + 35,000 + 215,300) - (100,200 + 30,500 + 149,800 + 100,700)

= 440,200 - 381,200

= $59,000

3.) Incremental profit/(loss) :-

Product	Incremental profit (loss)	Decision
Product 10	$30,600	Should be processed further
Product 12	($11,500)	Should be sold at split off point
Product 14	$11,200	Should be processed further

​​​​​Incremental profit (loss) = Incremental revenue - incremental cost

Product 10 = (189,900 - 59,100) - 100,200 = 30,600

Product 12 = (35,000 - 16,000) - 30,500 = (11,500)

Product 14 = (215,300 - 54,000) - 149,800 = 11,200

Net income using above results :-

= (189,900 + 16,000 + 215,300) - (100,700 + 100,200 + 149,800)

= 421,200 - 350,700

= $70,500

Yes the net income is increasing by $11,500 (70,500 - 59,000)