Stapplos Company manufachures basis of thelr sales value at the split-off point
ID: 2413290 • Letter: S
Question
Stapplos Company manufachures basis of thelr sales value at the split-off point The number of units produced heree products uning the same production process. The costs incurred up to the split ofl point are $200,000. These costs are allocated to the products on the , the selling prices per unit of the three products at the spl off point and after further processing. and the addišonal s processing costs are as follow Additional Processing Costs 14.000 1,000 12,000 Number of Selling Price Selling Price Uniks Produced a Splitof 10.00 11 60 19 40 after Processing 15 00 6 20 21.60 Produc 5,000 10,000 ,000 Instructions Present the analysis in a table (a) Whsich prodac) should be processed fther and wich should be sold at the slt off point? b) Would your decision be dfferent& the company was uning the quarity of oulput to allocate joint coots? ExplaExplanation / Answer
a)
Cost incurred upto the split off point = 200000
Total selling price at split off point = 10 + 11.6 + 19.4 = 41
Cost allocated to Product X = 200000*(10/41) = 48780.49
Cost allocated to Product Y = 200000*(11.6/41) = 56585.36
Cost allocated to Product Z = 200000*(19.40/41) = 94634.15
Profit in each product if sold at split off point:
Product X = 5000*10 - 48780.49 = 1219.51
Product Y = 10000*11.60 - 56585.36 = 59414.64
Product Z = 4000*19.40 - 94634.15 = (17034.15)
Profit in each product if further processed:
Product X = 5000*15 - 48780.49 - 14000 = 12219.51
Product Y = 10000*16.20 - 56585.36 - 21000 = 84414.64
Product Z = 4000*21.60 - 94634.15 - 12000 = 20234.15
After analysing the profit calculated above, we can say that Product X and Y should be processed further because profit of product X and Y is higher if processed further and Product Z should be sold at split off point because loss is lower if sold at split off point.
b)
Cost incurred upto the split off point = 200000
Total selling price at split off point = 5000 + 10000 + 4000 = 19000
Cost allocated to Product X = 200000*(5000/19000) = 52631.58
Cost allocated to Product Y = 200000*(10000/19000) = 105263.16
Cost allocated to Product Z = 200000*(4000/19000) = 42105.26
Profit in each product if sold at split off point:
Product X = 5000*10 - 52631.58 = (2631.58)
Product Y = 10000*11.60 - 105263.16 = 10736.84
Product Z = 4000*19.40 - 42105.26 = 35494.74
Profit in each product if further processed:
Product X = 5000*10 - 52631.58 - 14000 = (16631.58)
Product Y = 10000*11.60 - 105263.16 - 21000 = (10263.16)
Product Z = 4000*19.40 - 42105.26 - 12000 = 23494.74
After analysing the profit calculated above, we can say that Product X and Y should be sold at split off point and Product Z should be processed further. So, decision would be different if company was using quantity of output to allocate joint costs.
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