{"id":623,"date":"2018-04-19T20:03:18","date_gmt":"2018-04-19T20:03:18","guid":{"rendered":"https:\/\/courses.lumenlearning.com\/wm-accountingformanagers\/?post_type=chapter&#038;p=623"},"modified":"2024-04-29T17:34:33","modified_gmt":"2024-04-29T17:34:33","slug":"sell-or-process-further-decisions","status":"publish","type":"chapter","link":"https:\/\/courses.lumenlearning.com\/wm-accountingformanagers\/chapter\/sell-or-process-further-decisions\/","title":{"raw":"Sell or Process Further Decisions","rendered":"Sell or Process Further Decisions"},"content":{"raw":"<div class=\"textbox learning-objectives\">\r\n<h3>Learning Outcomes<\/h3>\r\n<ul>\r\n \t<li>Create a report outlining the data to support a sell or process further decision<\/li>\r\n<\/ul>\r\n<\/div>\r\nSo, what should we do with each grind of flour? The purchase price of the wheat, and grinding it into flour are joint costs. We have to get it this far to sell it. But what happens if we decide to bag it for retail sale? Well, let\u2019s look at this information in an excel spreadsheet:\r\n<table style=\"border-collapse: collapse; width: 100%;\" border=\"1\">\r\n<tbody>\r\n<tr style=\"height: 15px;\">\r\n<td class=\"shaded\" style=\"width: 100%; height: 15px; text-align: center;\" colspan=\"4\">Flower Power, Inc<\/td>\r\n<\/tr>\r\n<tr style=\"height: 15px;\">\r\n<td style=\"width: 100%; text-align: center; height: 15px;\" colspan=\"4\">Sell or Process Further<\/td>\r\n<\/tr>\r\n<tr style=\"height: 15px;\">\r\n<td style=\"width: 33.1877%; height: 15px;\"><\/td>\r\n<td style=\"width: 22.0525%; height: 15px;\"><\/td>\r\n<td style=\"width: 23.0349%; height: 15px;\"><\/td>\r\n<td style=\"width: 21.7249%; height: 15px;\"><\/td>\r\n<\/tr>\r\n<tr style=\"height: 15px;\">\r\n<td style=\"width: 33.1877%; height: 15px;\"><\/td>\r\n<td style=\"width: 22.0525%; height: 15px; text-align: center;\">Coarse Flour<\/td>\r\n<td style=\"width: 23.0349%; height: 15px; text-align: center;\">Fine Flour<\/td>\r\n<td style=\"width: 21.7249%; height: 15px; text-align: center;\">Bread Flower<\/td>\r\n<\/tr>\r\n<tr style=\"height: 15px;\">\r\n<td style=\"width: 33.1877%; height: 15px;\">Sales value after all processing<\/td>\r\n<td style=\"width: 22.0525%; height: 15px; text-align: right;\">$34,000<\/td>\r\n<td style=\"width: 23.0349%; height: 15px; text-align: right;\">$50,000<\/td>\r\n<td style=\"width: 21.7249%; height: 15px; text-align: right;\">$31,000<\/td>\r\n<\/tr>\r\n<tr style=\"height: 15px;\">\r\n<td style=\"width: 33.1877%; height: 15px;\">Less: sales value at the split-point<\/td>\r\n<td style=\"width: 22.0525%; height: 15px; text-align: right;\">$30,000<\/td>\r\n<td style=\"width: 23.0349%; height: 15px; text-align: right;\">$40,000<\/td>\r\n<td style=\"width: 21.7249%; height: 15px; text-align: right;\">$20,000<\/td>\r\n<\/tr>\r\n<tr style=\"height: 30px;\">\r\n<td style=\"width: 33.1877%; height: 30px;\">Incremental revenue from further processing<\/td>\r\n<td style=\"width: 22.0525%; height: 30px; text-align: right;\">$4,000<\/td>\r\n<td style=\"width: 23.0349%; height: 30px; text-align: right;\">$10,000<\/td>\r\n<td style=\"width: 21.7249%; height: 30px; text-align: right;\">$11,000<\/td>\r\n<\/tr>\r\n<tr style=\"height: 15px;\">\r\n<td style=\"width: 33.1877%; height: 15px;\">Less: cost of bagging<\/td>\r\n<td style=\"width: 22.0525%; height: 15px; text-align: right;\"><span style=\"text-decoration: underline;\">$5,000<\/span><\/td>\r\n<td style=\"width: 23.0349%; height: 15px; text-align: right;\"><span style=\"text-decoration: underline;\">$5,000<\/span><\/td>\r\n<td style=\"width: 21.7249%; height: 15px; text-align: right;\"><span style=\"text-decoration: underline;\">$5,000<\/span><\/td>\r\n<\/tr>\r\n<tr style=\"height: 15px;\">\r\n<td style=\"width: 33.1877%; height: 15px;\">Profit (loss) from bagging the flour<\/td>\r\n<td style=\"width: 22.0525%; height: 15px; text-align: right;\"><span style=\"text-decoration: underline;\">($1,000)<\/span><\/td>\r\n<td style=\"width: 23.0349%; height: 15px; text-align: right;\"><span style=\"text-decoration: underline;\">$5,000<\/span><\/td>\r\n<td style=\"width: 21.7249%; height: 15px; text-align: right;\"><span style=\"text-decoration: underline;\">$6,000<\/span><\/td>\r\n<\/tr>\r\n<\/tbody>\r\n<\/table>\r\nSo, where do you think we should sell each of our grinds of flour?\r\n\r\nCourse flour should probably be sold in bulk, since the cost of continuing to process it, is <strong>more<\/strong> than the incremental revenue we will gain. But processing and bagging the fine grind and bread flour looks like a good idea! Again, there may be other issues, such as equipment purchases or opportunity costs that come into play, but if we look just at the incremental revenue and expenditures from the continued processing.\r\n<div class=\"textbox exercises\">\r\n<h3>LEarn More<\/h3>\r\nIf you would like to see <a href=\"https:\/\/www.youtube.com\/watch?v=5bwD-jhZVHU\" target=\"_blank\" rel=\"noopener\">an additional explanation of selling or processing further, take a look at this video<\/a>.\r\n\r\n<\/div>\r\n<div class=\"textbox tryit\">\r\n<h3>Practice Questions<\/h3>\r\nhttps:\/\/assess.lumenlearning.com\/practice\/ea3320cb-969f-49dd-bcf9-064141d13123\r\n<\/div>","rendered":"<div class=\"textbox learning-objectives\">\n<h3>Learning Outcomes<\/h3>\n<ul>\n<li>Create a report outlining the data to support a sell or process further decision<\/li>\n<\/ul>\n<\/div>\n<p>So, what should we do with each grind of flour? The purchase price of the wheat, and grinding it into flour are joint costs. We have to get it this far to sell it. But what happens if we decide to bag it for retail sale? Well, let\u2019s look at this information in an excel spreadsheet:<\/p>\n<table style=\"border-collapse: collapse; width: 100%;\">\n<tbody>\n<tr style=\"height: 15px;\">\n<td class=\"shaded\" style=\"width: 100%; height: 15px; text-align: center;\" colspan=\"4\">Flower Power, Inc<\/td>\n<\/tr>\n<tr style=\"height: 15px;\">\n<td style=\"width: 100%; text-align: center; height: 15px;\" colspan=\"4\">Sell or Process Further<\/td>\n<\/tr>\n<tr style=\"height: 15px;\">\n<td style=\"width: 33.1877%; height: 15px;\"><\/td>\n<td style=\"width: 22.0525%; height: 15px;\"><\/td>\n<td style=\"width: 23.0349%; height: 15px;\"><\/td>\n<td style=\"width: 21.7249%; height: 15px;\"><\/td>\n<\/tr>\n<tr style=\"height: 15px;\">\n<td style=\"width: 33.1877%; height: 15px;\"><\/td>\n<td style=\"width: 22.0525%; height: 15px; text-align: center;\">Coarse Flour<\/td>\n<td style=\"width: 23.0349%; height: 15px; text-align: center;\">Fine Flour<\/td>\n<td style=\"width: 21.7249%; height: 15px; text-align: center;\">Bread Flower<\/td>\n<\/tr>\n<tr style=\"height: 15px;\">\n<td style=\"width: 33.1877%; height: 15px;\">Sales value after all processing<\/td>\n<td style=\"width: 22.0525%; height: 15px; text-align: right;\">$34,000<\/td>\n<td style=\"width: 23.0349%; height: 15px; text-align: right;\">$50,000<\/td>\n<td style=\"width: 21.7249%; height: 15px; text-align: right;\">$31,000<\/td>\n<\/tr>\n<tr style=\"height: 15px;\">\n<td style=\"width: 33.1877%; height: 15px;\">Less: sales value at the split-point<\/td>\n<td style=\"width: 22.0525%; height: 15px; text-align: right;\">$30,000<\/td>\n<td style=\"width: 23.0349%; height: 15px; text-align: right;\">$40,000<\/td>\n<td style=\"width: 21.7249%; height: 15px; text-align: right;\">$20,000<\/td>\n<\/tr>\n<tr style=\"height: 30px;\">\n<td style=\"width: 33.1877%; height: 30px;\">Incremental revenue from further processing<\/td>\n<td style=\"width: 22.0525%; height: 30px; text-align: right;\">$4,000<\/td>\n<td style=\"width: 23.0349%; height: 30px; text-align: right;\">$10,000<\/td>\n<td style=\"width: 21.7249%; height: 30px; text-align: right;\">$11,000<\/td>\n<\/tr>\n<tr style=\"height: 15px;\">\n<td style=\"width: 33.1877%; height: 15px;\">Less: cost of bagging<\/td>\n<td style=\"width: 22.0525%; height: 15px; text-align: right;\"><span style=\"text-decoration: underline;\">$5,000<\/span><\/td>\n<td style=\"width: 23.0349%; height: 15px; text-align: right;\"><span style=\"text-decoration: underline;\">$5,000<\/span><\/td>\n<td style=\"width: 21.7249%; height: 15px; text-align: right;\"><span style=\"text-decoration: underline;\">$5,000<\/span><\/td>\n<\/tr>\n<tr style=\"height: 15px;\">\n<td style=\"width: 33.1877%; height: 15px;\">Profit (loss) from bagging the flour<\/td>\n<td style=\"width: 22.0525%; height: 15px; text-align: right;\"><span style=\"text-decoration: underline;\">($1,000)<\/span><\/td>\n<td style=\"width: 23.0349%; height: 15px; text-align: right;\"><span style=\"text-decoration: underline;\">$5,000<\/span><\/td>\n<td style=\"width: 21.7249%; height: 15px; text-align: right;\"><span style=\"text-decoration: underline;\">$6,000<\/span><\/td>\n<\/tr>\n<\/tbody>\n<\/table>\n<p>So, where do you think we should sell each of our grinds of flour?<\/p>\n<p>Course flour should probably be sold in bulk, since the cost of continuing to process it, is <strong>more<\/strong> than the incremental revenue we will gain. But processing and bagging the fine grind and bread flour looks like a good idea! Again, there may be other issues, such as equipment purchases or opportunity costs that come into play, but if we look just at the incremental revenue and expenditures from the continued processing.<\/p>\n<div class=\"textbox exercises\">\n<h3>LEarn More<\/h3>\n<p>If you would like to see <a href=\"https:\/\/www.youtube.com\/watch?v=5bwD-jhZVHU\" target=\"_blank\" rel=\"noopener\">an additional explanation of selling or processing further, take a look at this video<\/a>.<\/p>\n<\/div>\n<div class=\"textbox tryit\">\n<h3>Practice Questions<\/h3>\n<p>\t<iframe id=\"assessment_practice_ea3320cb-969f-49dd-bcf9-064141d13123\" class=\"resizable\" src=\"https:\/\/assess.lumenlearning.com\/practice\/ea3320cb-969f-49dd-bcf9-064141d13123?iframe_resize_id=assessment_practice_id_ea3320cb-969f-49dd-bcf9-064141d13123\" frameborder=\"0\" style=\"border:none;width:100%;height:100%;min-height:300px;\"><br \/>\n\t<\/iframe>\n<\/div>\n\n\t\t\t <section class=\"citations-section\" role=\"contentinfo\">\n\t\t\t <h3>Candela Citations<\/h3>\n\t\t\t\t\t <div>\n\t\t\t\t\t\t <div id=\"citation-list-623\">\n\t\t\t\t\t\t\t <div class=\"licensing\"><div class=\"license-attribution-dropdown-subheading\">CC licensed content, Original<\/div><ul class=\"citation-list\"><li>Sell or Process Further Decisions. <strong>Authored by<\/strong>: Freedom Learning Group. <strong>Provided by<\/strong>: Lumen Learning. <strong>License<\/strong>: <em><a target=\"_blank\" rel=\"license\" href=\"https:\/\/creativecommons.org\/licenses\/by\/4.0\/\">CC BY: Attribution<\/a><\/em><\/li><\/ul><\/div>\n\t\t\t\t\t\t <\/div>\n\t\t\t\t\t <\/div>\n\t\t\t <\/section>","protected":false},"author":62559,"menu_order":9,"template":"","meta":{"_candela_citation":"[{\"type\":\"original\",\"description\":\"Sell or Process Further Decisions\",\"author\":\"Freedom Learning Group\",\"organization\":\"Lumen Learning\",\"url\":\"\",\"project\":\"\",\"license\":\"cc-by\",\"license_terms\":\"\"}]","CANDELA_OUTCOMES_GUID":"f9acb49e-e3f1-4650-91f8-2048b86c69f7, f07c7ff8-16af-4945-ac12-00839a82d5ee","pb_show_title":"on","pb_short_title":"","pb_subtitle":"","pb_authors":[],"pb_section_license":""},"chapter-type":[],"contributor":[],"license":[],"class_list":["post-623","chapter","type-chapter","status-publish","hentry"],"part":111,"_links":{"self":[{"href":"https:\/\/courses.lumenlearning.com\/wm-accountingformanagers\/wp-json\/pressbooks\/v2\/chapters\/623","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/courses.lumenlearning.com\/wm-accountingformanagers\/wp-json\/pressbooks\/v2\/chapters"}],"about":[{"href":"https:\/\/courses.lumenlearning.com\/wm-accountingformanagers\/wp-json\/wp\/v2\/types\/chapter"}],"author":[{"embeddable":true,"href":"https:\/\/courses.lumenlearning.com\/wm-accountingformanagers\/wp-json\/wp\/v2\/users\/62559"}],"version-history":[{"count":11,"href":"https:\/\/courses.lumenlearning.com\/wm-accountingformanagers\/wp-json\/pressbooks\/v2\/chapters\/623\/revisions"}],"predecessor-version":[{"id":4154,"href":"https:\/\/courses.lumenlearning.com\/wm-accountingformanagers\/wp-json\/pressbooks\/v2\/chapters\/623\/revisions\/4154"}],"part":[{"href":"https:\/\/courses.lumenlearning.com\/wm-accountingformanagers\/wp-json\/pressbooks\/v2\/parts\/111"}],"metadata":[{"href":"https:\/\/courses.lumenlearning.com\/wm-accountingformanagers\/wp-json\/pressbooks\/v2\/chapters\/623\/metadata\/"}],"wp:attachment":[{"href":"https:\/\/courses.lumenlearning.com\/wm-accountingformanagers\/wp-json\/wp\/v2\/media?parent=623"}],"wp:term":[{"taxonomy":"chapter-type","embeddable":true,"href":"https:\/\/courses.lumenlearning.com\/wm-accountingformanagers\/wp-json\/pressbooks\/v2\/chapter-type?post=623"},{"taxonomy":"contributor","embeddable":true,"href":"https:\/\/courses.lumenlearning.com\/wm-accountingformanagers\/wp-json\/wp\/v2\/contributor?post=623"},{"taxonomy":"license","embeddable":true,"href":"https:\/\/courses.lumenlearning.com\/wm-accountingformanagers\/wp-json\/wp\/v2\/license?post=623"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}