Kranston Company is considering whether to sell Retox at the split-off point or subject it to further processing and produce a more refined product known as Retox-F. Consider the following items:
I. The selling price of Retox-F
II. The joint processing cost of Retox.
III. The separable cost of producing Retox-F.
Which of the above items is (are) relevant to Kranston's decision to process Retox into Retox-F?

Question

Quizplus · Accepted Answer

The selling price of Retox-F (I) and the separable cost of producing Retox-F (III) are relevant to the decision because they directly impact the profitability of further processing Retox into Retox-F. The joint processing cost of Retox (II) is a sunk cost and not relevant to the decision regarding further processing.

Kranston Company Is Considering Whether to Sell Retox at the Split-Off