When a product is the result of a joint process, the decision to process the product past the split-off point further should be influenced by which of the following measures?
A) the product's proportion of the total costs
B) the portion of the joint costs allocated to the individual products
C) the extra revenue earned past the split-off point
D) the incremental operating income earned past the split-off point

Question

Quizplus · Accepted Answer

The decision to process a joint product further past the split-off point should be influenced by the incremental operating income earned past the split-off point. This is because the incremental operating income is the difference between the additional revenue earned and the additional costs incurred by further processing, and it provides a measure of the added profitability of processing the product further. The other measures listed may also be relevant, but they are not as direct an indicator of the profitability of further processing.

When a Product Is the Result of a Joint Process