Sell-or-process-further decision

The sell-or-process-further decision asks whether a joint product should be sold at the split-off point or processed further to command a higher price.

ByHoang TruongUpdated June 30, 2026

FrameworkRelevant costing

See it move

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Product A sells for €20,000 at the split-off point. Processing it further adds €8,000 of extra revenue, taking the sale price to €28,000, but costs €6,000 to complete — a net figure of €22,000, which is €2,000 better than selling at split-off. The joint costs already allocated to the product, say €30,000, are sunk and irrelevant to this comparison.

Where it fits

SubjectCost AccountingCoreTopicRelevant Costs & Decision-MakingCore

The formula

LaTeX

\text{Incremental Profit} = (\text{Revenue if processed further} - \text{Revenue at split-off}) - \text{Further processing costs}

Variables

$R e v e n u e i f p r ocesse df u r t h er$: Expected sales revenue after completing the additional processing (€)
$R e v e n u e a t s pl i t - o f f$: Sales revenue obtainable by selling the product immediately at the split-off point without further work (€)
$F u r t h er p r ocess in g cos t s$: Separable costs incurred only if the product is processed beyond the split-off point (€)

Process further if incremental profit > 0; joint costs are sunk and excluded from this calculation