Final answer:
Allocated joint costs are treated as sunk costs and should not affect the sell-or-process-further decision. Only the incremental costs and benefits of processing further should be considered.
Step-by-step explanation:
When making a sell-or-process-further decision, allocated joint costs are typically treated as sunk costs and should not affect the decision-making process. Sunk costs refer to costs that have already been incurred and cannot be recovered. These costs are not relevant to the future benefits or costs of a decision. Therefore, when deciding whether to sell a product as is or process it further, only the incremental costs and benefits of processing further should be considered, excluding the allocated joint costs.
Allocated joint costs, once incurred, are typically regarded as sunk costs—costs that have already been spent and cannot be recovered. In the sell-or-process-further decision, focusing solely on incremental costs and benefits of further processing is crucial. By disregarding joint costs allocated to the products, decision-makers can objectively evaluate the additional expenses and revenues associated with further processing, ensuring a more accurate assessment of profitability and optimal decision-making.