Joint cost allocations should be ignored for decisions such as selling a joint product at the split-off point or processing it further.

Question

Quizplus · Accepted Answer

Joint cost allocations are costs incurred to produce multiple products at the same time until a certain point called split-off point. Since these costs cannot be allocated to individual products in a reasonable manner, it is irrelevant for decision-making purposes. Therefore, joint cost allocations should be disregarded when deciding whether to sell a joint product at the split-off point or process it further.

Joint Cost Allocations Should Be Ignored for Decisions Such as Selling