Question

In: Accounting

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

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 $

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

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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

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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 $
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Solutions

Expert Solution

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.


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