BAR Relevant Costs · Updated November 2026

Sell at Split-Off or Process Further: Ignore Joint Costs

Joint costs incurred before split-off are sunk for the process-further decision.

Joint costs

Costs incurred before the split-off point are common to the joint products and generally do not change based on whether one product is processed further.

Incremental revenue

Processing further is attractive when the additional revenue from the processed product exceeds the additional processing cost.

Allocation trap

Allocated joint cost can make one product look more or less profitable, but that allocation is not relevant to the incremental process-further decision.

Exam strategy

Compare only incremental revenue after split-off with incremental cost after split-off.

The takeaway

For sell-or-process-further decisions, ignore joint costs and compare only the additional revenue and additional processing cost after split-off.

Related Summit resources

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FAQ

Are joint costs relevant to the process-further decision?

No.

What revenue matters?

The incremental revenue from further processing.

What is the common trap?

Using allocated joint cost in the decision.