A. Sunk costs are costs that have already been incurred and cannot be changed. Joint costs incurred prior to a decision as to whether to process the products after the split-off point are sunk costs, because they have already been incurred at the point when the decision is made.
B. Differential costs are costs that differ between options. The joint costs have already been incurred prior to the decision about whether to process the products further after the split-off point. The joint costs will be the same whether the products are processed further or not. Therefore, they are not differential costs.
C. The only relevant factors are the incremental revenues and incremental costs that would be incurred if the decision is made to process the products further. Joint costs incurred prior to the decision are not relevant costs because they would not differ between the alternatives.
D. Standard costs are estimated costs for direct materials, direct labor and manufacturing overhead that are predetermined or estimated as they would apply under specified conditions. Standard costs are a fundamental element of the budgeting process. Joint costs incurred are actual costs, so they cannot be standard costs.
