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Advanced Cost Accounting Questions -

Question 1 - Please respond the below statement: 200 words and reference

I hope that you are all having a good week so far. Our assignment this week is to discuss why we agree or disagree with the following statement.

"Managers must decide whether a product should be sold at splitoff or processed further. The sales value at splitoff method of joint-cost allocation is the best method for generating the information managers need for this decision."

I disagree with this statement because the allocation of joint-costs, regardless of the method used (i.e. sales value at splitoff, physical measure, NRV, etc.), is irrelevant when deciding between selling the products at the splitoff point or processing them further. This is because the amount of joint costs do not change when managers decide to do further processing. As Datar and Rajan explain, the costs and revenues that are relevant to this decision are the additional costs incurred for further processing and the incremental revenues "attainable after the splitoff point" (2018). In other words, managers analyze incremental costs and incremental revenues to help them decide if additional processing will increase or decrease operating income.

Obviously, it does not make sense to process products further if the cost of doing so outweighs the revenues that can be obtained after the splitoff point. On the other hand, if operating income can be increased, then further processing is a good idea. Because the only relevant items are incremental revenues and incremental costs, the sales value at splitoff method provides no relevant information for management's decision to sell the product at splitoff or process it further.

Question 2 - Please respond the below statement: 200 words and reference.

Joint cost is a cost that benefits more than one product and is used when a business has a production process from which final products are split off during a later stage of production. The point at which a business determines the final product is called the split-off point. Managers are faced with the tough decision of deciding when to sell their products. Determining when it is no longer cost-effective to continue processing a product before sale is the question at hand. The point at which some products are removed from production and sold while others receive additional processing is known as the split-off point. Relevant revenues and costs both must be evaluated in order to make the best decision. I disagree with the statement because future revenues that can be earned if further processing takes place should be heavily considered. A business must determine and compare the revenues that would be received if the product is sold at the split-off point versus the net revenues that would be received if the product is processed further which requires knowing the additional costs of further processing. Any costs incurred prior to the split-off point are irrelevant to the decision to process further as those are sunk costs; only future costs are relevant costs (Graybeal, Franklin, & Cooper, 2019). An example would be, Milk being processed further into cheese and ice cream. Ice cream would have the base cost from the milk but would incur more costs to be processed further. Those costs need to be evaluated further to determine if it is even worth making ice cream. (What will the effect be on operating costs?)

Question 3 - Please answer the below question. 100 words and reference

Is it possible to have more than one split off point in these processes? Why or why not?

Attachment:- Advanced Cost Accounting Questions.rar