Total net income if all the products are sold at split-off point
Total sales value at split-off point = Sales value of Product 10 + Sales value of Product 12 + Sales value of Product 14 = $61,000 + $15,200 + $54,800 = $131,000.
Common process costs = $100,100
Total net income if all the products are sold at split-off point = Total sales value at split-off point - Common process costs = $131,000 - $100,100 = $30,900
Total net income if all the products are sold after further processing
Total sales value after further processing = Sales value of Product 10 + Sales value of Product 12 + Sales value of Product 14 = $189,700 + $34,700 + $214,900 = $439,300
Total costs incurred = Common process costs + Costs to process further = $100,100 + $101,000 + $29,600 + $149,700 = $380,400
Total net income if all the products are sold after further processing = Total sales value after further processing - Total costs incurred = $439,300 - $380,400 = $58,900
Product | Sales Value after further processing | Sales Value at Split-off Point | Incremental Sales Value | Cost to Process Further | Incremental profit (loss ) | Decision |
Product 10 | $189,700 | $61,000 | $128,700 | $101,000 | $27,700 | Process further |
Product 12 | $34,700 | $15,200 | $19,500 | $29,600 | -$10,100 | Sell at split-off point |
Product 14 | $214,900 | $54,800 | $160,100 | $149,700 | $10,400 | Process further |
Total net income using the above decision =Total net income if all the products are sold at split-off point + Incremental profit from Product 10 after further processing + Incremental profit from Product 14 after further processing = $30,900 + $27,700 + $10,400 = $69,000
Is the net income different from that determined in part (b)?
Yes, net income is increased by $10,100.
Increase in net income = Total net income using the above decision - Total net income if all the products are sold after further processing = $69,000 - $58,900 = $10,100.
Exercise 20-10 Stahl Inc. produces three separate products from a common process costing $100,100. Each of...
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Exercise 20-10 Stahl Inc. produces three separate products from a common process costing $100,200. 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 Product 10 Product 12 $59,900 15,500 56,000 $100,000 30,900 150,900 Sales Value after Further Processing $190,200 34,700 216,000 Product 14 Determine total...
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Exercise 20-10 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 $60,800 15,200 55,600 Cost to Process Further $100,900 30,400 150,400 Sales Value after Further Processing $190,500 35,600 214,000 x Your...
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