Principles of Managerial Accounting · free preview
Sell-or-Process-Further Decisions
A product at a split-off point should be processed further only when the incremental revenue from further processing exceeds the incremental costs, with joint costs already incurred excluded from the comparison.
1. Joint products and the split-off point
Joint products and the split-off point
2. The incremental rule
The incremental rule
3. Why joint costs mislead
Why joint costs mislead
4. Capacity and market interactions
Capacity and market interactions
5. Joint cost definition
What are joint costs? Use the figures from the worked example in this lesson and state the result in the requested units.
6. Joint cost relevance
Why are joint costs irrelevant to the sell-or-process-further decision?
7. Process further test
Product A sells for 30 dollars at split-off and 48 dollars after further processing costing 12 dollars. Should it be processed further?
8. Reject further processing
Product B sells for 20 dollars at split-off and 27 dollars after further processing costing 10 dollars. What is the right choice?
9. Split-off term
The moment joint products become separately identifiable is the ____ point. One word.
10. Separable cost term
Costs incurred after the split-off point are called ____ costs. One word.
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