Stahl Inc. produces three separate products from a common process costing $100,0
ID: 2527870 • Letter: S
Question
Stahl Inc. produces three separate products from a common process costing $100,000. 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.Sales Value
at Split-Off
Point Cost to
Process
Further Sales Value
after Further
Processing Product 10 $60,800 $100,900 $190,500 Product 12 15,200 30,400 35,600 Product 14 55,600 150,400 214,000 Stahl Inc. produces three separate products from a common process costing $100,000. 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.
Sales Value
at Split-Off
Point Cost to
Process
Further Sales Value
after Further
Processing Product 10 $60,800 $100,900 $190,500 Product 12 15,200 30,400 35,600 Product 14 55,600 150,400 214,000 LINK TO TEXT LINK TO TEXT LINK TO TEXT LINK TO TEXT LINK TO TEXT LINK TO TEXT LINK TO TEXT LINK TO TEXT LINK TO TEXT Stahl Inc. produces three separate products from a common process costing $100,000. 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.
Sales Value
at Split-Off
Point Cost to
Process
Further Sales Value
after Further
Processing Product 10 $60,800 $100,900 $190,500 Product 12 15,200 30,400 35,600 Product 14 55,600 150,400 214,000
Explanation / Answer
Determine the total net income if all products are sold at the split-off point.
= $60800 + $15200 + $55600 - $100000
= $31,600 Net income
Determine the total net income if all products are sold after further processing.
= $190500 + $35600 + $214000 - $100900 - $30400 - $150400 - $100000
= $58,400 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
$28,800
Should be processed further
Product 12
($10,000)
Should be sold at the split-off point
Product 14
$8,000
Should be processed further
Workings
Product 10 = $190500 - $100900 - $60800 = $28,800,Gain
Product 12 = $35600 - $30400 - $15200 = ($10,000), (Loss)
Product 14 = $214000 - $150400 - $55600 = $8000,Gain
Determine the total net income using the results from previous part
= $190500 + $35600 + $214000 – $100900 – 100000 - $150400
= $88,800 Net income
Is the net income different from that determined in part (b) ?
Yes, Net Income is Increasing by “$30,400”
Increase in Net Income = $88,800 - $58,400 = $30,400
Product
Incremental Profit / (Loss)
Decision
Product 10
$28,800
Should be processed further
Product 12
($10,000)
Should be sold at the split-off point
Product 14
$8,000
Should be processed further
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