In a sell-or-process-further decision, joint production costs:
A) Are irrelevant to the decision.
B) Should be allocated to outputs based on relative sales dollars.
C) Should be allocated to outputs based on relative physical units.
D) Cannot be allocated to products for financial reporting purposes.
E) Usually are traceable to individual products/outputs.

Question

Quizplus · Accepted Answer

Joint production costs are not relevant in a sell-or-process-further decision because they have already been incurred and cannot be recovered. The decision should be based on the incremental costs and revenues associated with each alternative.

In a Sell-Or-Process-Further Decision, Joint Production Costs