Answer (B) is correct . Common, or joint, costs cannot be identified with a particular joint product. By definition, joint products have common costs until the split-off point. Costs incurred after the split-off point are separable costs. The decision to continue processing beyond split-off is made separately for each product. The costs relevant to the decision are the separable costs because they can be avoided by selling at the split-off point. They should be compared with the incremental revenues from processing further. Thus, items I.?(revenue from selling at split-off point), II.?(variable costs of upgrade), III.?(avoidable fixed costs of upgrade), and IV.?(revenue from selling after further processing) are considered in making the upgrade decision.
Answer (A) is incorrect because The joint manufacturing costs are the only irrelevant item.
Answer (C) is incorrect because The joint manufacturing costs are the only irrelevant item.
Answer (D) is incorrect because The joint manufacturing costs are the only irrelevant item.
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Which items should be reviewed when making the upgrade decision?