Question

Stahl Inc. produces three separate products from a common process costing $100,800. 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			$60,400				$100,600				$190,000
Product 12			15,600				30,100				35,400
Product 14			55,500				150,800				214,500

(a)

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

Net income

$Type your answer here

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

c. calculate incremental profit/loss and determine which products should be sold at the split-off point and which should be processed further

product 10

product 12

product 14

d. Determine total net income using the results from previous part

Answer 1

Solution:-

(a)  total net income if all products are sold at the split-off point = $ ( 60,400 + 15,600 + 55,500 - 100,800 )

= $ 30,700

(b) total net income if all products are sold after further processing = $ ( 190,000 + 35,400 + 214,500 - 100,600 - 30,100 - 150,800 - 100,800 )

= $ 57,600

( c ) calculate incremental profit/loss and determine which products should be sold at the split-off point and which should be processed further

product 10 - sales after further processing because in this we will be benefitted.

if sold before processing then sales value  = $ 60,400

if sold after processing then profit = $ 190,000 - $ 100,600 = $ 89,400

Incremental profit = $ 89,400 - $ 60,400 = $ 29,000

Product 12 -

if sold before processing amount realise = $ 15,600

if sold after processing amount realised = $ 35,400 - 30,100 = $ 5,300

so it must be sold before processing at split off

Incremental Loss = $ 5,300 - $ 15,600 = ($ 10,400 )

product 14

if sold at split off point amount realised = $ 55,500

if sold after processing amount realised = $ 214,500 - $ 150,800 = $ 63,700

so it must be sold after processing

Incremental profit = $ 63,700 - $ 55,500 = $ 8,200

( d )  total net income using the results from previous part = $ ( 89,400 + 15,600 + 63,700 - 100,800 )

= $ 67,900