Question

Exercise 7-10 (Video) Stahl Inc. produces three separate products from a common process costing $100,900. 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 $59,300 $100,400 $189,600 Product 12 15,900 29,100 34,800 Product 14 54,500 149,900 214,400

Determine total net income if all products are sold at the split-off point. Net income $ LINK TO TEXT

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

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 $ Should be sold at the split-off pointShould be processed further Product 12 $ Should be sold at the split-off pointShould be processed further Product 14 $ Should be sold at the split-off pointShould be processed further LINK TO TEXT

Determine total net income using the results from previous part. Net income $ Is the net income different from that determined in part (b)? NoYes , net income is higherlower by $

Answer 1

a) The total net income if all products are sold at the split-off point :

= Total Sales Value at Split-Off Point (-) Commom Process Cost

= $129,700 (-) $100,900 = $28,800.

b) The total net income if all products are sold after further processing.:

= Total Sales Value after Further Processing (-) Cost to Process Further (-) Commom Process Cost

= $438,800 (-) $279,400 (-) $100,900

= $58,500.

c) Split the common process cost of $100,900 in the ratio of Sales Value at Split-Off Point. The allocated cost of each product will be :

Product	Allocated Common Process Cost	Allocated Profit at Split-Off Point	Profit (loss) after further processing
Product10	$46,132	$13,167	$43,068
Product12	$ 12,369	$3,531	($6,669)
Product14	$42,399	$12,102	$22,101

Product	Incremental profit (loss) [Profit (loss) after further processing (-) Allocated Profit at Split-Off Point]	Decision
Product10	$29,901	Should be processed further.
Product12	($3,138)	Should be sold at the split-off point.
Product14	$9,999	Should be processed further.

d) Total net income using the results from part (c)

= $43,068 (+) $3,531 (+) $22,101

= $68,700.

e) Yes, net income in part (d) is different from part (b).

f) Net income is higher in part (d) compared to part (b).