Asked by Shanelle States on May 26, 2024
Verified
When making the decision of whether to process further a joint product, it is generally better to allocate the joint costs using the relative sales value method to ensure the correct decision is made.
Joint Product
A product that is produced simultaneously with one or more other products in a single production process, where the costs of production cannot be individually attributed to each product.
Relative Sales Value Method
A method used to allocate joint costs based on the relative sales values of different products produced from the same process.
- Understand the importance of considering opportunity costs in decision-making.
Verified Answer
FA
Faris AbabnehMay 28, 2024
Final Answer :
False
Explanation :
The decision to process a joint product further beyond the split-off point should not be based on the allocation of joint costs because these costs are sunk costs and do not change with the decision. The decision should be based on whether the incremental revenue from processing further exceeds the incremental costs of processing.
Learning Objectives
- Understand the importance of considering opportunity costs in decision-making.
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