Which of the following statements is true of sell-or-process-further decisions i

Question

Which of the following statements is true of sell-or-process-further decisions in joint costing? Select one: a. Joint costs incurred before the splitoff point are relevant in deciding whether to process the product further. b. All separable costs in joint-cost allocations are incremental costs. c. Separable costs incurred before the splitoff point are irrelevant in deciding whether to process the product further. d. Costs that differ between the alternatives of selling products or processing further are relevant.

Explanation / Answer

Answer: d) Costs that differ between the alternatives of selling products or processing further are relevant.

Relevant cost, in managerial accounting, refers to the incremental and avoidable cost of implementing a business decision

a. Joint costs incurred before the splitoff point are relevant in deciding whether to process the product further

False

Joint costs incurred before the split-off point is a sunk cost which has already been incurred before further processing of the products and which cannot be avoided whether the decision to process further is made or not.

b. All separable costs in joint-cost allocations are incremental costs

False. Incremental costs are those costs which are incurred for further processing of the products. Joint costs are not incremental costs and cannot be considered as relevant for further processing

c. Separable costs incurred before the splitoff point are irrelevant in deciding whether to process the product further.

False:

Separable costs incurred before the split of point is not relevant as it has already incurred before taking the decision of further processing of product.

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