Question

Stahl Inc. produces three separate products from a common process costing $100,100. 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 $59,500 $100,700 $190,700 Product 12 16,000 29,700 34,700 Product 14 56,000 149,600 215,400

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 processed furtherShould be sold at the split-off point 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)? YesNo , net income is lowerhigher by $ Click if you would like to Show Work for this question: Open Show Work

Answer 1

Answer:

(a)	Sales ($59,500 + $16,000 + $56,000)	$ 131,500
	Joint costs	(100,100)
	Net income	$ 31,400

(b)	Sales ($190,700 + $34,700 + $215,400)	$ 440,800
	Joint costs	(100,100)
	Additional costs ($100,700 + $29,700 + $149,600)	(280,000)
	Net income	$   60,700

(c)
		Product 10	Product 12	Product 14
	Incremental revenue(1)	$ 131,200	$ 18,700	$ 159,400
	Incremental costs	(100,700)	(29,700)	(149,600)
	Incremental profit (loss)	$   30,500	$(11,000)	$   9,800

⁽¹⁾Sales value after further processing – Sales value @ split-off point

Products 10 and 14 should be processed further and product 12 should be sold at the split-off point.

(d)	Sales ($190,700 + $34,700 + $215,400)	$ 440,800
	Joint costs	(100,100)
	Additional costs ($100,700 + $149,600)	(250,300)
	Net income	$   90,400

Net income is $29,700 ($90,400 – $60,700) higher in (d) than in (b) because product 12 is not processed further, thereby increasing overall profit $29,700.