Answer:
a. Computation of total Net Income if all products are sold at split-off point
Sales : Product 10 $60,000
product 12 15,000
product 14 <u> 55,000</u>
130,000
Common processsing cost <u> (100,000)</u>
Net income <u> 30,000</u>
<u />
b. Computation of Net Income if all produts are sold after proccessing further
sales : Product 10 $190,000
product 12 35,000
product 14 215,000
<u> 440,000</u>
Cost :
Common cost 100,000
futher processing:
Product 10 100,000
product 12 30,000
product 14 <u>150,000 </u> <u> (380,000)</u>
Net Income <u> 60,000 </u>
<u />
c. Using Incremental Analysis
prodcut 10 product 12 product 14
Increase in sales revenue $130,000 $20,000 $160,000
further processing cost <u> (100,000)</u> <u>(30,000) </u> <u>(150,000) </u>
Incremental revenue <u> 30,000 </u> <u> (10,000) </u> <u>10,000 </u><u> </u>
<em>product 12 should not be processed further because it will bring loss to the company. </em>
d. <u>Computation of Net Income based on the "c" above result </u>
Sales : Product 10 $190,000
product 12 15,000
product 14 <u>215,000</u>
420,000
cost:
common cost 100,000
further processing cost :
product 10 100,000
product 14 <u> 150,000 </u> <u> 350,000</u>
Net Income <u> 70,000</u>
Explanation: