Problem: Benson, 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 12
|
$50,000
|
|
$100,000
|
|
$190,000
|
|
|
Product 14
|
10,000
|
|
30,000
|
|
35,000
|
|
|
Product 16
|
60,000
|
|
150,000
|
|
220,000
|
|
Q1. Determine total net income if all products are sold at the split-off point.
Q2. Determine total net income if all products are sold after further processing.
Q3. Using incremental analysis, determine which products should be sold at the split-off point and which should be processed further.
- Product 12
- Product 14
- Product 16
Q4. Determine total net income using the results from the previous part of the question.