The Carter Corporation makes products A and B in a joint process from a single input, R. During a typical production run, 50,000 units of R yield 20,000 units of A and 30,000 units of B at the split-off point. Joint production costs total $90,000 per production run. The unit selling price for A is $4.00 and for B is $3.80 at the split-off point. However, B can be processed further at a total cost of $60,000 and then sold for $7.00 per unit. In a decision between selling B at the split-off point or processing B further, which of the following items is not relevant:- a. $60,000 cost to process B beyond the split-off point.
b. the $3.80 unit sales price of B at the split-off point.
c. the portion of the $90,000 joint production cost allocated to B.
d. the $60,000 cost to process B beyond the split-off point.
e. the $3.80 unit sales price of B at the split-off point.
f. the portion of the $90,000 joint production cost allocated to B
g. the $7 unit selling price for B after further processing.

c. the portion of the $90,000 joint production cost allocated to B.

Explanation:

The irrelevant costs in a decision between selling B at the split-off point or processing B further would be those that had already been incurred and so cannot be changed.

These are sunk costs and for this scenario are the costs of producing product B up to the split-off point. They have already been incurred and so do not matter in making a decision about processing further.

cognitive overload: having a lot on your mind impairs decision-making and tends to result in the simplest, but not necessarily best, option being selected.

empathy gaps: overlooking how you might feel in a different situation can result in unnecessary purchases, such as overbuying when shopping for food on an empty stomach.

optimism and overconfidence: wearing rose-tinted glasses and having unrealistic expectations about the future can affect money management and leave you unprepared for a change in circumstance.

instant gratification: seeking instant gratification drives impulsive spending and can undermine long-term planning and savings.

harmful habits: automatic or mindless behaviour can amplify a poor financial decision as it becomes a recurring event.

social norms: we are heavily influenced by the actions of others; while this can be in certain circumstances, it also contributes to the pressure to keep up with the joneses through conspicuous consumption.

our agriculture industry and our business industry