Which of the Following Statements Regarding a Joint Production Process

question 28

Multiple Choice

Which of the following statements regarding a joint production process is not true?

• A) A common decision facing management is whether to sell products at the split-off point or to sell these products after further processing.
• B) The allocation of joint (common) production costs to individual products helps management determine which products should be processed beyond the split-off point.
• C) Costs incurred up to the split-off point are referred to as joint production costs.
• D) The decision as to whether individual products should be sold "as is" or processed further is made by comparing incremental revenues and incremental costs.
• E) For financial reporting purposes output (i.e., inventory) is costed at the sum of separable processing cost plus an allocated share of joint production costs.

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Definitions:

Direct Materials Cost

The cost of materials that are an integral part of the finished product.

Fixed Cost

A cost that remains constant in total regardless of changes in the level of activity, such as lease payments and managerial salaries.

Units Produced

The total number of units manufactured during a given period, indicating the level of production output.

Activity Base

A measure or quantity (such as machine hours, labor hours, or materials used) that is directly associated with the costs incurred by an activity or process.