Costs incurred before the split-off point should be allocated to products according to sales revenue to determine whether products should be sold at the split-off point or processed further.

Question

Quizplus · Accepted Answer

Costs incurred before the split-off point are sunk costs and should not influence the decision to sell or process further; this decision should be based on the incremental costs and revenues associated with further processing.

Costs Incurred Before the Split-Off Point Should Be Allocated to Products