Question

hether to sellE20-10 Stahl Inc. produces three separate products from a commo ther joint$100,000. Each of the products can be sold at the split-off point or Proces and selling price data fou ther and then sold for a higher price. Shown below are cost ip recent period. Sales Value after Further Value Cost to Process Further at Split-Off Processin Point $60,000 15,000 55,000 $190000 35,000 $100,000 30,000 Product 10 Product 12 Product 14 150,000 215,000 Instructions (a) Determine total net income if all products are sold at the split-off point (b) Determine total net income if all products are sold after further (c) Using incremental analysis, determine which products should be sodg. point and which should be processed further Determine total net income using the results from (c) and explain whw is different from that determined in (b). ld be sold at the split-of m (c) and explain why the net income (d)

Answer 1

1) Total sales value at the split off point = Sales value of product A +Sales value of product B +Sales value of product C

=60000+15000+55000

= 130000

Common cost = 100000

Total Income at the split off point = 130000 -100000 i.e 30000

2) Total sales value after further processing = Sales value of product A +Sales value of product B +Sales value of product C

= 190000+35000+215000

= 440000

Total cost of further processing = Processing cost of A + Processing cost of B + Processing cost of C

= 100000+30000+150000 i.e 280000

Common Cost = 100000

Total income after further processing = 440000-280000-100000 i.e 60000

3)

Particulars	Sales Value at Split off point	Sales Value after further processing	Incremental Sales	Further processing cost	Incremental profit
Product A	60000	190000	130000	100000	30000
Product B	15000	35000	20000	30000	-10000
Product C	55000	215000	160000	55000	105000

Product A and Product C should be sold after further processing and Product B should be sold at the split off point as the company is earning incremental profit on selling product A and C after further processing and Company is earning loss on selling the Product B after further processing .