Stahl Inc. produces three separate products from a common process costing $100,100. 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

PointCost to

Process

FurtherSales Value

after Further

ProcessingProduct 10$59,500$100,700$190,700Product 1216,00029,70034,700Product 1456,000149,600215,400

Your answer is correct.

Determine total net income if all products are sold at the split-off point.

Net income$

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Determine total net income if all products are sold after further processing.

Net income$

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Calculate incremental profit/(loss) and determine which products should be sold at the split-off point and which should be processed further.(Enter negative amounts using either a negative sign preceding the number e.g. -45 or parentheses e.g. (45).)

ProductIncremental profit (loss)DecisionProduct 10$

Should be processed further

Should be sold at the split-off point

Product 12$

Should be sold at the split-off point

Should be processed further

Product 14$

Should be sold at the split-off point

Should be processed further

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Determine total net income using the results from previous part.

Net income$

Is the net income different from that determined in part (b)?

No

Yes

, net income is

higher

lower

by $

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Pottery Ranch Inc. has been manufacturing its own finials for its curtain rods. The company is currently operating at 100% of capacity, and variable manufacturing overhead is charged to production at the rate of 54% of direct labor cost. The direct materials and direct labor cost per unit to make a pair of finials are $4 and $5, respectively. Normal production is 26,000 curtain rods per year.

A supplier offers to make a pair of finials at a price of $13.30 per unit. If Pottery Ranch accepts the supplier's offer, all variable manufacturing costs will be eliminated, but the $46,700 of fixed manufacturing overhead currently being charged to the finials will have to be absorbed by other products.

(a)

Prepare the incremental analysis for the decision to make or buy the finials.(Enter negative amounts using either a negative sign preceding the number e.g. -45 or parentheses e.g. (45).)

MakeBuyNet Income

Increase (Decrease)Direct materials$enter direct materials in dollars

$enter direct materials in dollars

$enter direct materials in dollars

Direct laborenter direct labor in dollars

enter direct labor in dollars

enter direct labor in dollars

Variable overhead costsenter variable overhead costs in dollars

enter variable overhead costs in dollars

enter variable overhead costs in dollars

Fixed manufacturing costsenter fixed manufacturing costs in dollars

enter fixed manufacturing costs in dollars

enter fixed manufacturing costs in dollars

Purchase priceenter the purchase price in dollars

enter the purchase price in dollars

enter the purchase price in dollars

Total annual cost$enter total annual cost in dollars

$enter total annual cost in dollars

$enter total annual cost in dollars

(b)

Should Pottery Ranch buy the finials?

select between Yes and No

Yes

No

, Pottery Ranch shouldselect an option

not buy

buy

the finials.

(c)

Would your answer be different in (b) if the productive capacity released by not making the finials could be used to produce income of $49,700?

select between Yes and No

Yes

No

, income wouldselect between increase and decrease

decrease

increase

by $enter a dollar amount

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