Fester Company Is Considering Whether to Sell Retox at the Split-Off

question 62

Multiple Choice

Fester Company is considering whether to sell Retox at the split-off point or subject it to further processing and produce a more refined product known as Retox-F. Consider the following items:
I. The selling price of Retox-F.
II. The joint processing cost of Retox.
III. The separable cost of producing Retox-F.
Which of the above items is (are) relevant to Foster's decision to process Retox into Retox-F?

• A) I only
• B) II only
• C) III only
• D) I and II
• E) I and III

---

Definitions:

Factory Overhead

All indirect costs associated with manufacturing, excluding direct materials and direct labor costs.

Work in Process

Goods in the manufacturing process that are not yet completed, representing a portion of inventory that is between raw materials and finished goods.

Controlling Account

An account in the general ledger that summarizes and controls the total of subsidiary ledger entries, such as accounts receivable or accounts payable.

Job Cost Sheets

Documents that record and summarize all costs associated with a specific job or project, used in managerial accounting to track direct materials, direct labor, and overhead.