When a product is the result of a joint process, the decision to process the product past the splitoff point further should be influenced by the
A)total amount of the joint costs.
B)portion of the joint costs allocated to the individual products.
C)extra revenue earned past the splitoff point.
D)extra net operating income earned past the splitoff point.
E)joint costs allocated under the NRV method.

Question

Quizplus · Accepted Answer

The decision to process the product past the splitoff point should be based on the extra net operating income earned past the splitoff point. This means that the additional revenue earned should be higher than the additional costs incurred. The total amount of joint costs and the portion allocated to individual products are not relevant in this decision-making process. The NRV method is also not relevant as it is a method for allocating joint costs, not for making decisions about further processing.

When a Product Is the Result of a Joint Process