Question

what factors should be considered in the Sell Now As Is, or Process Further (i.e., Rework and Sell) situation? This applies to both products that are in need of "rework" as well as joint products that come out of common materials and are separated at the "split-off" point. A decision then has to be made as to whether each of the joint products should be sold as is or processed more and then sold. How does one decide?

Answer 1

A.This type of decision usually involves processing decisions about joint products, although it can also be applied to processing decisions for a single product. In a joint product environment:

1. Products are not separately identifiable until after the split-off point
2. The costs incurred up to the split-off point cannot be separated or avoided.

B. When joint products are produced, separate products are identifiable after the split-off point. At that point producers frequently have the option of selling the products immediately or of performing additional processing on some or all of the products before selling them.
C. When making the decision to process a product further or not, the only relevant facts are the differential future costs and benefits: the separable costs incurred beyond the split-off point, the difference between the revenue that can be earned at split-off, and the revenue that can be earned after further processing.