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In: Accounting

Stahl Inc. produces three separate products from a common process costing $100,700. Each of the products...

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.

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

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).)

Determine total net income using the results from previous part.

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

Solutions

Expert Solution

X Y Z Y-X-Z
Product Sale value at splitoff point Sale value if further processed Cost of further processing Financial advantage / (Disadvantage)
Product 10 $59,100 $1,89,900 $1,00,200 $30,600 Further processed
Product 12 $16,000 $35,000 $30,500 -$11,500 Sold at split-off point
Product 14 $54,000 $2,15,300 $1,49,800 $11,500 Further processed
Total sales $1,29,100 $4,40,200 $2,80,500
Joint cost $1,00,700 $3,81,200
Net income $28,400 $59,000

a) $28,400

b) $59,000

c)

Product 10 $30,600 Further processed
Product 12 -$11,500 Sold at split-off point
Product 14 $11,500 Further processed

d)

Total sales = $189,900 + $215,300 + $16,000 = $421,200

Total cost = $100,200 + $149,800 + $100,700 = $350,700

Sales $4,21,200
Cost $3,50,700
Net profit $70,500

e)

The net income is different from that determined in part (b).

Net income increases by $70,500 - $59,000 = $11,500


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