Question

Stahl Inc. produces three separate products from a common process costing $100,500. 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 $60,100 $100,300 $190,200 Product 12 15,500 29,200 34,200 Product 14 54,100 151,000 214,800 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 $ Product 12 $ Product 14 $ 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)? , net income is by $

Answer 1

Solution a:

Net income if all products sold at split off point = Revenue - Joint cost = ($60,100 + $15,500 + $54,100) - $100,500 = $29,200

Solution b:

Net income if all products sold at after further processing = Revenue - Further processing cost - Joint cost = ($190,200 + $34,200 + $214,800) - ($100,200 + $29,200 + $151,000) - $100,500 = $439,200 - $280,400 - $100,500 = $58,300

Solution c:

Computaiton of incremental profit or loss on further processing
Particulars	Product 10	Product 12	Product 14
Revenue if processed further	$190,200.00	$34,200.00	$214,800.00
Revenue if sold as is	$60,100.00	$15,500.00	$54,100.00
Incremental revenue	$130,100.00	$18,700.00	$160,700.00
Further processing cost	$100,300.00	$29,200.00	$151,000.00
Incremental net income (Loss)	$29,800.00	-$10,500.00	$9,700.00
The company should:	Processed further	Sold product As Is	Processed further

Solution d:

Net income = $58,300 + $10,500 = $68,800

Solution e:

Yes, net income is increasing by $10,500