The production process of a company s main product yields a by-product Production costs or $700,000 are incurred during this process and $300,000 m additional costs are incurred to finalize the main product. The by-product can be sold for $200 000 without further processing A manager proposed the conversion of the by-product into another product that would cost $100,000 and generate revenue of $250,000. When deciding on this proposal the company should

The production process of a company s main product yields a by-product Production costs or $700,000 are incurred during this process and $300,000 m additional costs are incurred to finalize the main product. The by-product can be sold for $200 000 without further processing A manager proposed the conversion of the by-product into another product that would cost $100,000 and generate revenue of $250,000. When deciding on this proposal the company should
A . select an approbate cost allocation method to allocate the $1 100 000 joint costs
B. evaluate whether other nonfinancial factors outweigh the Si 50.000 in incremental income
C. treat the $100,000 conversion cost as the marginal cost 1o produce the new product
D. ignore the $200 000 sales revenue for the by-product because it Is irrelevant

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Answer: C