sell-or-process-further decision Definition | Business Dictionaries from
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Business Definition for: sell-or-process-further decision
sell-or-process-further decision

short-term, nonroutine decision about whether to sell a product at a particular stage of production or to process it further in the hope of obtaining additional revenue. When two or more products are produced simultaneously from the same input by a joint process, these products are called joint products . The term joint costs is used to describe all the manufacturing costs incurred prior to the point where the joint products are identified as individual products, referred to as the split-off point . At the split-off point some of the joint products are in final form and salable to the consumer, whereas others require additional processing. In many cases, the company might have the option to sell the products at the split-off point or process them further for increased revenue. In connection with this type of decision, joint costs are considered irrelevant, since the joint costs have already been incurred at the time of the decision, and therefore are sunk cost . The decision will rely exclusively on additional revenue compared to the additional costs incurred due to further processing.

Copyright © 2005, 2000, 1995, 1987 by Barron's Educational Series, Inc., Reprinted by arrangement with Publisher.


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