Asked by Michelle Marquez on Jul 05, 2024
Verified
Generally, joint costs are not relevant in decision making after split-off because:
A) they do not help increase the sales.
B) they increase the sales margin only marginally.
C) they do not change regardless of any decision.
D) joint costs reflect opportunity costs.
Joint Costs
The costs that are incurred from producing two or more products in the same process.
Split-Off
A point in the manufacturing process where joint products are separated and continue through the production process as distinct items.
Sales Margin
The difference between the selling price of a product and its cost of sales, usually represented as a percentage of sales.
- Gain an understanding of the idea of sunk costs and why they are not relevant to future decisions.
Verified Answer
SD
sylvester davisJul 10, 2024
Final Answer :
C
Explanation :
Joint costs are costs that are incurred in the process of producing multiple products simultaneously. Once the products have split off and have become separate and identifiable products, the joint costs become irrelevant and do not change regardless of any decision made. Therefore, they are not considered in decision making after split-off.
Learning Objectives
- Gain an understanding of the idea of sunk costs and why they are not relevant to future decisions.