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Prepared by Diane Tanner University of North Florida

Chapter 22. Process Further Decisions. Prepared by Diane Tanner University of North Florida. Additional Processing Decisions. A company can sell some products: Unassembled and Unfinished Assembled and Unfinished Assembled and Finished.

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Prepared by Diane Tanner University of North Florida

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  1. Chapter 22 Process Further Decisions Prepared by Diane Tanner University of North Florida

  2. Additional Processing Decisions • A company can sell some products: • Unassembled and Unfinished • Assembled and Unfinished • Assembled and Finished Should the product be sold ‘as is’ or processed further? Process Further Sell As Is

  3. Making Process Further Decisions • Decision is based on the • Incremental profit • The difference between the incremental revenues and the incremental costs • Incremental revenues • Difference between the revenues generated from selling the product 'as is,' and the revenues generated after further processing • Incremental costs • Additional costs incurred from further processing  

  4. The Key to Process Cost Decisions Costs associated with producing the products up to the split-off points are sunk and are therefore never relevant • Split-off point = Point where the company makes a decision to sell as-is or process further

  5. Evaluating Decisions to Sell or Process Further • If incremental revenues are less than incremental costs • If incremental revenues equal incremental costs • If incremental revenues are greater than incremental costs Sell 'as is' Rely on Qualitative Characteristics Process further Goal is to generate additional profit

  6. The End

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