Exercise 20-10 Stahl Inc. produces three separate products from a common process
ID: 2527281 • Letter: E
Question
Exercise 20-10 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 Cost to ProcesS Further Sales Value after Further Processing Sales Value at Split-Off Product 10 Product 12 Product 14 Point $60,100 15,500 54,100 $100,300 29,200 151,000 $190,200 34,200 214,800 Determine total net income if all products are sold at the split-off point Net income $ LINK TO TEXT VIDEO: SIMILAR EXERCISE Determine total net income if all products are sold after further processing Net income $ LINK TO TEXT VIDEO: SIMILAR EXERCISEExplanation / Answer
Determine the total net income if all products are sold at the split-off point.
= $60,100 +$15,500 + $54,100 - $10,0500
= $29,200 Net income
Determine the total net income if all products are sold after further processing.
= $ 190,200 + $34,200 + $2,14,800 - $1,00,500 - $100300 - $29200 - $151000
= $28,200 Net income
Calculate incremental profit / (Loss) and determine which products should be sold at the split-off point and which should be processed further.
Product
Incremental Profit / (Loss)
Decision
Product 10
$29,800
Should be sold
Product 12
($10,500)
Should not be sold
Product 14
$9,700
Should be sold
Workings
Product 10 = $190200 - $100300 - $60100 = $29,800 gain, should
Product 12 = $34200 - $29200 - $15500 = ($10,500) loss, shouldn't
Product 14 = $214800 - $151000 - $54100 = $9,700 gain, should
Determine the total net income using the results from previous part
= $190200 + $15500 + $214800 – $100300 - $100500 - $151000
= $68,700 Net income
Product
Incremental Profit / (Loss)
Decision
Product 10
$29,800
Should be sold
Product 12
($10,500)
Should not be sold
Product 14
$9,700
Should be sold
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