Joint costs are irrelevant for your “sell or process further” decision. Those costs are the same, whether you sell the product at splitoff or process further. Incremental revenue is the additional revenue you get from selling one more unit that has been processed further. Incremental cost is the additional cost.In respect to this, how are allocated joint costs treated when making a sell or process further decision?
They are allocated to the individual products. This is done based on the relative salves value of the joint products. It is irrelevant for any sell-or-process-further decisions because the joint product cost are sunk cost.
Secondly, what is sell or process further? The sell or process further decision is the choice of selling a product now or processing it further to earn additional revenue. This choice is based on an incremental analysis of whether the additional revenues to be gained will exceed the additional costs to be incurred as part of the additional processing work.
Simply so, what is the decision rule in deciding whether to sell a product or process it further?
The decision rule in a decision to sell a product or to process it further is: Process further as long as the incremental revenue from the additional processing exceeds the incremental processing costs.
When deciding whether to sell a product at the split off point or process it further?
When deciding whether to sell a product at the split-off point or process it further, joint costs are not usually relevant because: such amounts are sunk and do not change with the decision.
What steps are frequently involved in management's decision making process?
The following steps are frequently involved in management's decision-making process: (a) Identify the problem and assign responsibility. (b) Determine and evaluate possible courses of action. (c) Make a decision.Are variable costs always relevant costs explain?
Variable costs are relevant costs only if they differ in total between the alternatives under consideration. Not all fixed costs are sunk—only those for which the cost has already been irrevocably incurred. A variable cost can be a sunk cost if it has already been incurred.Which of the following would be considered a qualitative factor in a make or buy decision?
Managerial Accounting; Test 3 (Ch 20-21); Practice
| Question | Answer |
| 18.) Which of the following would be considered a qualitative factor in a make-or-buy decision? | Cost of lost morale |
| 19.) Incremental costs are the costs that differ between the alternatives being considered. | True |
Which of the following is a major accounting contribution to the managerial decision making process in evaluating possible courses of action?
A major accounting contribution to the managerial decision-making process in evaluating possible courses of action is to: provide relevant revenue and cost data about each course of action. Fixed costs may change between alternatives. Variable costs will always change between alternatives.What accounting issue results from the production process that creates joint products?
An accounting issue related to joint products is how to allocate the joint costs incurred during the production process that creates the joint products. How are allocated joint costs treated when making a sell or process further decision?What are the two types of pricing environments for sales to external parties?
What are the two types of pricing environments for sales to external parties? The first type of pricing environment is where the company is a price taker; that is, the company does not set the price, but instead the price is set by a competitive market. In the second type of situation, the company sets the price.What is further process?
Further process means to perform any activity on GASOLINE, including distillation, treating with hydrogen, or blending, for the purpose of bringing the GASOLINE into compliance with the standards in this Section. Sample 2.What is the split off point in accounting?
A split-off point is the location in a production process where jointly manufactured products are henceforth manufactured separately; thus, their costs can be identified individually after the split-off point. Prior to the split-off point, production costs are allocated to jointly manufactured products.What are joint costs in accounting?
In accounting, a joint cost is a cost incurred in a joint process. Joint costs may include direct material, direct labor, and overhead costs incurred during a joint production process. A joint process is a production process in which one input yields multiple outputs.When should a special order be accepted?
A special order generally should be accepted if: A) its revenue exceeds allocated fixed costs, regardless of the variable costs associated with the order. 
