Question

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)?

Answer 1

	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