Southridge Corporation has a joint process that produces two products: A and B.Each product may be sold at the split-off point or processed further and then sold.Joint-processing costs for a year are $20,000.
Product A can be sold at the split-off point for $32,000.Alternatively,Product A can be processed further and sold for $40,000.Additional processing costs are $5,000.
When deciding whether to sell Product A at the split-off point or to process further,the ________ is NOT relevant.
A) joint processing cost of $20,000
B) sales value at split-off of $32,000
C) sales value at completion of $40,000
D) additional processing cost of $5,000

Question

Quizplus · Accepted Answer

The joint processing cost of $20,000 is a sunk cost and not relevant to the decision of whether to sell Product A at the split-off point or process it further. Relevant costs are those that will change as a result of the decision, such as the additional processing cost and the sales values at split-off and after further processing.

Southridge Corporation Has a Joint Process That Produces Two Products