Question

BACK NEXT Exercise 7.23 ad Barat, Inc. produces three separate products from a common process costing $100,100. Each of the products can be sold at the for a higher price. The cost and selling price data for a recent period are as follows: point or can be processed further and then Sales Value Split-off Point $50,900 10.600 59,100 Cost to Process Further $100,100 Product 12 Product 14 Product 16 Sales Value after Further Processing $109,200 34,600 150,700 220,300 Determine the total net income all products are sold at the split-off point. Total net income Determine the total net income if a products are sold after further processing Total net income Using increment analysis, determine which products should be sold at the with a negative sign preceding the number, 9.-15.000 or parenthes off point and which show be processed further (15,000).) as amount reduces the time the enter Incremental Profit/(Loss) Decision Product 12 Product 14 Product 16 Determine the total net income in the results from the previous part of the question

Answer 1

Solution:

1.) Determine the total net income if all products are sold at the split off point.

Net income =sales value at split off point of product 12+ product 14 + product 16 - Common process costing

= $50,900 + $10,600 + $59,100 - $100,100

=$20,500

Net income =$20,500

2.) Determine the total net income if all products are sold after further processing.

Net income = Sales value after further processing of product 12 + product 14 + product 16 - common process costing - Cost to process further of product 12 - product 14 - product 16

= $189,200 + $34,600 + $220,300 -$100,100 - $100,100 - $29,400 - $150,700

= $ 63,800

3.) Using incremental analysis, determine which product should be sold at the split off point and which should be processed further.

	Incremental Profit /(loss)	Decision
Product 12	$38,200 gain($189,200 - $100,100 - $50,900)	Should be processed.
Product 14	$(5,400, loss) ($34,600 - $29,400 - 10,600)	Should not be processed.
Product 16	$10,500, gain ($220,300 - $150,700 - $59,100)	Should be processed.

4.) Determine the total net income using the results from previous part of the question.

Net income = $189,200 + $10,600+ $220,300 - $100,100 - $100,100 - $150,700

= $69,200

Net income =$69,200