Answer
I disagree because managers should not only consider additional revenues and separable costs but also account for non-separable joint costs and long-term strategic factors in their decisions about processing further or selling at splitoff.
Work Step by Step
I disagree with the statement that managers should consider only additional revenues and separable costs when making decisions about selling at splitoff or processing further. While these factors are essential, it's vital to take a broader perspective. Managers should also consider non-separable joint costs and long-term strategic considerations.
Ignoring non-separable joint costs can lead to suboptimal decisions, as they are part of the overall cost structure. Additionally, long-term strategy and customer preferences may play a role in determining whether to process further. For instance, processing further may lead to higher market differentiation and customer satisfaction, even if the immediate additional revenues and separable costs are not favorable. Therefore, a comprehensive evaluation, including all relevant cost and strategic factors, is crucial for sound decision-making.
