Witte Company produces three products from a joint process.The products can be sold at split-off or processed further.In deciding whether to sell at split-off or process further,management should
A)allocate the joint cost to the products based on relative sales value prior to making the decision.
B)allocate the joint cost to the products based on a physical quantity measure prior to making the decision.
C)subtract the joint cost from the total sales value of the products before determining relative sales value and making the decision.
D)ignore the joint cost in making the decision.

Question

Quizplus · Accepted Answer

The decision to sell at split-off or process further should be based on the incremental costs and benefits after the split-off point. Joint costs are sunk costs at the decision-making point and should not influence the decision.

Witte Company Produces Three Products from a Joint Process