Exercise 20-10 Stahl Inc. produces three separate products from a common process
ID: 2532347 • Letter: E
Question
Exercise 20-10 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 Cost to Process Further Sales Value after Further Processing Sales Value at Split-Off Point $60,900 15,200 54,700 Product 10 Product 12 Product 14 $100,500 30,500 $189,100 34,700 215,000 150,900 Determine total net income if all products are sold at the split-off point. Net income s LINK TO TEXT VIDEO: SIMILAR EXERCISE Determine total net income if all products are sold after further processing Net income s LINK TO TEXT VIDEO: SIMILAR EXERCISEExplanation / Answer
Answer:
1
Net income =29800
Working for the answer:
Determine total net income if all products are sold at the split-off point.
Sales =
$60,900
+
$15,200
+
$54,700
=
$130,800
Joint costs =
101,000
Net income =
$29,800
_________________________________________________
2
Net income =55900
Working for the answer:
Determine total net income if all products are sold after further processing.
Sales =
$189,100
+
$34,700
+
$215,000
=
$438,800
Joint costs =
(101,000)
Additional costs =
$100,500
+
$30,500
+
$150,900
=
(281,900)
Net income =
$55,900
_____________________________________________________
3
Using incremental analysis, determine which products should be sold at the split-off point and which should be processed further
.
Product 10
Product 12
Product 14
Incremental Revenue (1)
$128,200
$19,500
$160,300
Incremental costs
(100,500)
(30,500)
(150,900)
Incremental profit (loss)
$27,700
($11,000)
$9,400
Sales value after further processing - Sales value @ split-off point
Products 10 and 14 should be processed further and product 12 should be sold at the split-off point.
__________________________________
4
Determine total net income using the results from (c) and explain why the net income is different from that determined in (b).
Sales =
$189,100
+
$15,200
+
$215,000
=
$419,300
Joint costs =
(101,000)
Additional costs =
$100,500
+
$0
+
$150,900
=
(251,400)
Net income =
$66,900
Net income is $11,000 ($66,900 - $55,900) higher in (d) than in (b) because product 12 is not processed further, thereby increasing overall profit $11,000
Determine total net income if all products are sold at the split-off point.
Sales =
$60,900
+
$15,200
+
$54,700
=
$130,800
Joint costs =
101,000
Net income =
$29,800
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