LINK TO TEXT LINK TO TEXT LINK TO TEXT Stahl Inc. produces three separate produc
ID: 2536279 • Letter: L
Question
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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 $59,000 $100,000 $189,000 Product 12 15,000 29,000 34,000 Product 14 54,000 149,000 214,000
Explanation / Answer
Determine the total net income if all products are sold at the split-off point.
= $59000 + 15000 + 54000 - 100000
= $28,000 Net income
Determine the total net income if all products are sold after further processing.
= $189000 + 34000 + 214000 -100000 – 29000 – 149000 – 100000
= $59,000 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
$30,000,Gain
Should be processed further
Product 12
($10,000), (Loss)
Should be sold at the split-off point
Product 14
$11,000,Gain
Should be processed further
Workings
Product 10 = $189000 – 100000 – 59000 = $30,000,Gain
Product 12 = $34000 – 29000 – 15000 = ($10,000), (Loss)
Product 14 = $214000 – 149000 – 54000 = $11,000,Gain
Determine the total net income using the results from previous part
= $189000 + 15000 + 214000 – 100000 – 100000 - 149000
= $69,000 Net income
Is the net income different from that determined in part (b) ?
Yes, Net Income is Increasing by “$10,000”
Increase in Net Income = $69,000 – 59,000 = $10,000
Product
Incremental Profit / (Loss)
Decision
Product 10
$30,000,Gain
Should be processed further
Product 12
($10,000), (Loss)
Should be sold at the split-off point
Product 14
$11,000,Gain
Should be processed further
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