Stahl Inc. produces three separate products from a common process costing $101,0

Question

Stahl Inc. produces three separate products from a common process costing $101,000. 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.

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).)

Sales Value
at Split-Off
Point Cost to
Process
Further Sales Value
after Further
Processing Product 10 $60,900 $100,500 $189,100 Product 12 15,200 30,500 34,700 Product 14 54,700 150,900 215,000

Explanation / Answer

Answer:

Incremental profit/loss = Sales value after further processing - Cost at further processing - Sales value at split off point

Product 10 = 189100 - 100500 - 60900= $27700 gain, should be processed further

Product 12 = 34700 -30500 - 15200 = - $11000 loss, should not be processed further

Product 14 = 215000 - 150900 - 54700 = $9400 gain, should be processed further

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