The Carter Corporation makes products A and B in a joint process from a single input, R. During a typical production run, 50,000 units of R yield 20,000 units of A and 30,000 units of B at the split-off point. Joint production costs total $90,000 per production run. The unit selling price for A is $4.00 and for B is $3.80 at the split-off point. However, B can be processed further at a total cost of $60,000 and then sold for $7.00 per unit. In a decision between selling B at the split-off point or processing B further, which of the following items is not relevant:_______-

a. $60,000 cost to process B beyond the split-off point.
b. the $3.80 unit sales price of B at the split-off point.
c. the portion of the $90,000 joint production cost allocated to B.
d. the $60,000 cost to process B beyond the split-off point.
e. the $3.80 unit sales price of B at the split-off point.
f. the portion of the $90,000 joint production cost allocated to B
g. the $7 unit selling price for B after further processing.

Question

27-12-2020
Business

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The Carter Corporation makes products A and B in a joint process from a single input, R. During a typical production run, 50,000 units of R yield 20,000 units of A and 30,000 units of B at the split-off point. Joint production costs total $90,000 per production run. The unit selling price for A is $4.00 and for B is $3.80 at the split-off point. However, B can be processed further at a total cost of $60,000 and then sold for $7.00 per unit. In a decision between selling B at the split-off point or processing B further, which of the following items is not relevant:_______-

a. $60,000 cost to process B beyond the split-off point.
b. the $3.80 unit sales price of B at the split-off point.
c. the portion of the $90,000 joint production cost allocated to B.
d. the $60,000 cost to process B beyond the split-off point.
e. the $3.80 unit sales price of B at the split-off point.
f. the portion of the $90,000 joint production cost allocated to B
g. the $7 unit selling price for B after further processing.

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Answer: c. the portion of the $90,000 joint production cost allocated to B.

Explanation:

The irrelevant costs in a decision between selling B at the split-off point or processing B further would be those that had already been incurred and so cannot be changed.

These are sunk costs and for this scenario are the costs of producing product B up to the split-off point. They have already been incurred and so do not matter in making a decision about processing further.