Further processing decision
A further-processing decision compares selling an output at the split-off point with processing it further. The financial benefit is incremental sales revenue less additional processing and other relevant costs, including any opportunity cost of scarce capacity. Joint costs already incurred and unchanged are excluded. Consider market demand, quality, risk and the ability to sell all extra output as well as the numerical result.
Worked example
Sale value rises from $12,000 at split-off to $17,000 after processing. Extra costs are $3,500, so processing adds $1,500 profit if there are no other relevant effects.
Common mistake
Allocated joint cost is not an additional cost caused by processing further. Do not let a reporting allocation obscure the incremental comparison.
Where it appears in your exams
| Qualification | Exam | Relationship | Period |
|---|---|---|---|
| ACCA | MA | Direct | September 2026–June 2027 |
| ACCA | PM | Direct | September 2026–June 2027 |
| FIA | FMA | Direct | September 2026–June 2027 |
