Path.p Words 0 QUESTION 15 Stapplees Company manufactures three products using t
ID: 2413326 • Letter: P
Question
Path.p Words 0 QUESTION 15 Stapplees Company manufactures three products using the samie production process. The costs incurred up to the splt-off point are $200,000 These costs ar allocated to the products on the basis of their sales value at the split-off point. The number of units produced, the selling prices per unit of the theee products at the split-off point and after further processing and the additional processing costs are as follow Number of Selling Price Selling Price Additional Product at Split off 5,000 10,000 4,000 $10.00 11.60 19.40 $15 00 16.20 2160 $14000 21,000 12000 Instructions Present the analysis in a table. (a) Which product(s) should be processed further and which should be sold at the split-off point? b) Would your decision be different if the company was using the quantity of output to allocate joint costs? Explain T T T ? Paragraph ' Arial 3(12pt) , :?.E. T e Cliel Sace and Submit to se and submit. Click Save A A Save All AnExplanation / Answer
a)
S.No
Product
X
Y
Z
Total
1
Units Produced
5000
10000
4000
19000
2
Selling Price at Split-off point(in $)
10
11.6
19.4
3
Sales Value at Split-off point (in $) ( 1x2)
50000
116000
77600
4
Total Sales Value at Split-off point
243600
5
Cost incurred up to Split-off Point
200000
6
Allocation of Split-off cost in proportion of Sales value at Split-off point (in $ )
41051
(200000*50000/243600)
95238
(200000*116000/243600)
63711
(200000*116000/243600)
7
Profit at Split-off point (3-6)
8949
20762
13889
43600
8
Selling Price after processing (in $)
15
16.2
21.6
9
Sales Value after processing (in $) (1x8)
75000
162000
86400
10
Allocation of Split-off cost in proportion of Sales value at Split-off point (in $)
41051
95238
63711
11
Additional Processing Cost (in $)
14000
21000
12000
12
Total Cost (in $) (10+11)
55051
116238
75711
13
Profit after Processing (9-12)
19949
45762
10689
14 Incremental
Profit on further 11000 25000 -3200
Processing (13-7)
It has seen from above table that for Product X & Product Y there is more profit by selling after further Processing than selling at Split-off, therefore should be processed further
In case of product Z there has been loss on further processing while there have been profit by selling at split-off , therefore should be selled at split-off.
b) Please find below
When allocation of cost is made on basis of quantity produced , Product X and Product Y should be further processed and Product Z should be sold at Split-off point.
S.No
Product
X
Y
Z
Total
1
Units Produced
5000
10000
4000
19000
2
Selling Price at Split-off point(in $)
10
11.6
19.4
3
Sales Value at Split-off point (in $) ( 1x2)
50000
116000
77600
4
Total Sales Value at Split-off point (in $)
243600
5
Cost incurred up to Split-off Point(in $)
200000
6
Allocation of Split-off cost in proportion of Units Produced (in $ )
52632
(200000*5000/19000)
105263
(200000*10000/19000)
42105
(200000*4000/1900)
7
Profit at Split-off point(in $)
-2632
10737
35495
43600
8
Selling Price after processing (in $)
15
16.2
21.6
9
Sales Value after processing (in $)
75000
162000
86400
10
Allocation of Split-off cost in proportion of Units Produced (in $ )
52632
105263
42105
11
Additional Processing Cost (in $)
14000
21000
12000
12
Total Cost (in $)
66632
126263
54105
13
Profit after Processing (in $)
8368
35737
32295
S.No
Product
X
Y
Z
Total
1
Units Produced
5000
10000
4000
19000
2
Selling Price at Split-off point(in $)
10
11.6
19.4
3
Sales Value at Split-off point (in $) ( 1x2)
50000
116000
77600
4
Total Sales Value at Split-off point
243600
5
Cost incurred up to Split-off Point
200000
6
Allocation of Split-off cost in proportion of Sales value at Split-off point (in $ )
41051
(200000*50000/243600)
95238
(200000*116000/243600)
63711
(200000*116000/243600)
7
Profit at Split-off point (3-6)
8949
20762
13889
43600
8
Selling Price after processing (in $)
15
16.2
21.6
9
Sales Value after processing (in $) (1x8)
75000
162000
86400
10
Allocation of Split-off cost in proportion of Sales value at Split-off point (in $)
41051
95238
63711
11
Additional Processing Cost (in $)
14000
21000
12000
12
Total Cost (in $) (10+11)
55051
116238
75711
13
Profit after Processing (9-12)
19949
45762
10689