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Question 3    ch 7 Stahl Inc. produces three separate products from a common process costing $100,700....

Question 3    ch 7

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
Cost to
Process
Further
Sales Value
after Further
Processing
Product 10 $59,100 $100,200 $189,900
Product 12 16,000 30,500 35,000
Product 14 54,000 149,800 215,300
Determine total net income if all products are sold at the split-off point.
Net income $

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Determine total net income if all products are sold after further processing.
Net income $

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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 $

Product 12 $

Product 14 $

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Determine total net income using the results from previous part.
Net income $


Is the net income different from that determined in part (b)?

, net income is

by $

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Answer #1

SOLUTION

1. Calculation of net income if all products are sold at the split off point-

Particulars Amount ($) Amount ($)
Sale value-
Product 10 59,100
Product 12 16,000
Product 14 54,000 129,100
Cost of goods sold (100,700)
Total net income 28,400

2. Calculation of net income if all products are sold after further processing-

Particulars Amount ($) Amount ($)
Sale value-
Product 10 189,900
Product 12 35,000
Product 14 215,300 440,200
Cost of goods sold (100,700)
Net income before further processing 339,500
Cost to process further
  Product 10 100,200
  Product 12 30,500
  Product 14 149,800 (280,500)
Net income after further processing 59,000

3.

Particulars Product 10 Product 12 Product 14
Sales after further processing 189,900 35,000 215,300
Sales value at split off point 59,100 16,000 54,000
130,800 19,000 161,300
Cost to process further 100,200 30,500 149,800
Incremental profit / (Loss) 30,600 (11,500) 11,500
Decision Should be processed further Should be sold at the split off point Should be processed further

4.

Particulars Amount ($) Amount ($)
Sale value-
Product 10 189,900
Product 12 16,000
Product 14 215,300 421,200
Cost of goods sold (100,700)
Net income before further processing 320,500
Cost to process further
  Product 10 100,200
  Product 14 149,800 (250,000)
Net income after further processing 70,500

Difference = 70,500 - 59,000 = 11,500

It is increased by $11,500

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