Sell or Process Further Decision

This video shows how to decide whether to sell or process further a joint product. When deciding whether to sell or process a product further, a manager should determine whether the incremental revenue from further processing is greater than the incremental cost from further processing. If the incremental revenue exceeds the incremental cost, then the product should be processed further. Joint costs (costs incurred prior to the splitoff point) are NOT relevant when determining what to do after the splitoff point. Joint costs are only relevant in determining the profitability of the entire operation, so their allocation to joint products can often lead to suboptimal managerial decision-making.

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