BU467 Chapter Notes - Chapter 9: Sunk Costs, Gross Margin
Document Summary
Joint product: in the process of making one product, one or more other products are created: main product: high sales value compared to other joint products, by-product: low sales value compares to other joint products. Joint costs: all the costs incurred to jointly product a group of goods: occurred prior to the split-off point (the point at which individual products are identified) Separable costs: the costs incurred after the split-off point: incremental costs that can be easily traced to each specific product. Physical output method: allocates joint costs using the relative proportion of physical output for each main product: can only be used when output is expressed in a physical manner. Processing a joint product beyond the split-off point. Managers often have a choice about whether to sell a product at the split-off point or to process it further: joint costs are irrelevant because they are sunk costs, look at incremental contribution margin for each product.
