(a) Determine the total net income if all products are sold at the split-off point.
Answer : 31362
| Particular | Amount in $ |
| Sales Value at the point of splitt off | |
| Product 10 | 60575 |
| Product 12 | 15871 |
| Product 14 | 55579 |
| 132025 | |
| Less: | |
| Common Cost | 100393 |
| Net Income | 31632 |
(b) Determine the total net income if all products are sold after further processing.
Answer : $ 58,399
| Particular | Amount in $ |
| Sales Value after further Processing | |
| Product 10 | 189932 |
| Product 12 | 35044 |
| Product 14 | 215769 |
| Total | 440745 |
| Less: | |
| Common Cost | 100393 |
| Cost for further processing | |
| Product 10 | 100792 |
| Product 12 | 30801 |
| Product 14 | 150360 |
| Total | 382346 |
| Net Income | 58399 |
(c) Using incremental analysis, determine which products should be sold at the split-off point and which should be processed further.
| Particular | Sales Value after further Processing | Cost for further processing | Sales Value at the point of splitt off |
Net gain/ Loss A-b-c |
||
| A | B | C | ||||
| Product 10 | 189932 | 100792 | 60575 | 28565 | Gain | should be processed further. |
| Product 12 | 35044 | 30801 | 15871 | -11628 | Loss | Should not process further |
| Product 14 | 215769 | 150360 | 55579 | 9830 | Gain | should be processed further. |
