ch12-AFM102s2012

Managerial accounting 50 40 10 20 10 12 35 joint

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Unformatted text preview: ant costs and benefits incremental revenues from further processing incremental costs of further processing ignore joint product costs (which are allocated common costs) ignore sunk costs consider qualitative factors Managerial Accounting 12-36 Joint Products: Sell Now vs. Process Further Decision rule: Process further if: Incremental revenues > incremental costs of further processing Sell at split-off if: Incremental revenues < incremental costs of further processing Managerial Accounting 12-37 Utilization of a Constrained Resource When a constraint exists, a company should select a product mix that maximizes the total contribution margin earned since fixed costs usually remain unchanged. A company should not necessarily promote those products that have the highest unit contribution margin. Rather, it should promote those products that earn the highest contribution margin in relation to the constraining resource. Managerial Accounting 12-38 Utilization of a Constrained Resource: An Example Ensign Company produces two products and selected data are shown below: Managerial Accounting 12-39 Ut...
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