Q Making a decision to process a product further is not influence d by joint cos
ID: 2518950 • Letter: Q
Question
Q Making a decision to process a product further is not influenced by joint cost allocation. However, it should be based on incremental costs and qualitative factors. Discuss this statement.
Q Making a decision to process a product further is not influenced by joint cost allocation. However, it should be based on incremental costs and qualitative factors. Discuss this statement.
Q Making a decision to process a product further is not influenced by joint cost allocation. However, it should be based on incremental costs and qualitative factors. Discuss this statement.
Explanation / Answer
Ans. As per the principles of costing for joint products and by products, if a product is an inherent result of a joint process, the decision to process further should not be influenced by the size of the total joint cost or the portion of the joint cost assigned to particular products. The decision to incur cost beyond the split off point is a matter of comparing revenue available at the split off point with the differential income attainable beyond split off point. Thus thus the statement in the question is correct.
Related Questions
Navigate
Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.