Question

When deciding, purely on financial grounds, whether or not to process a joint product further, which three pieces of information are required?

O the value of the common process costs.
O the method of apportioning the common costs between the joint products
O the sales value of the joint product at the separation point the final sales value of the joint product
O the further processing cost of the joint product

Answer 1

To decide if further processing of a joint product is financially viable, information on the product's sales value at the separation point, the final sales value after processing, and the further processing costs are essential.

Step-by-step explanation:

When deciding, purely on financial grounds, whether or not to process a joint product further, three critical pieces of information are required. These include:

1. The sales value of the joint product at the separation point
2. The final sales value of the joint product after further processing
3. The cost associated with the further processing of the joint product

To determine if further processing is financially beneficial, a firm compares the additional revenue that could be obtained from selling the processed product against the costs of further processing. If the marginal benefits in terms of added revenue exceed the marginal costs of processing, it might be advantageous to process the product further. This decision is supported by a cost/benefit analysis which compares the extra cost and benefit of producing one additional unit.