The scenario outlined above presents a unique problem to many organizations. The ability to split-off products for profit allow organizations to gain profit or eliminate loss during the middle manufacturing stages of a particular product. The ability to sell for $5,000 at split-off presents the organization with the ability to gain profit without further production. This profit is not clearly outlined in the details listed above. I personally believe the profit line associated with initial cost are not important. My opinion is supported by text. According to Mowen (2018), the joint costs are irrelevant to the decision of whether to sell at the split-off point or to proceed further. The true number the organization should focus on is the $6,400 sell price after split-off production continues. Of the $6,400, expenses incurred include $1,000. The additional expenses align with extra fixed cost. The equation I would support my thought includes:

6,400 (continued split-off sell price) - $5,000 (original product sell price) = $1,400 difference in price.

$1,400 (product sell price difference) $1,000 (expenses associated with additional split-off production) = + $400

The data supports with organization to continue production past split-off point because there is a profit of $400 per product.

This profit line, if the sale price stays constant could equal major revenue to the company. For example, 1,000 units produced x $400 = $400,000 (possible revenue gain and increases operational income).

The additional operational income could lead to more production on the front-end of production, or possible equipment and labor additions to help maximize production lines. All decisions should be aligned with the decision-making process. From a dollar amount decision, the additional production makes sense. Bean et. al (2023), outline that when decisions are made organizations should also take into consideration if the new product will undercut sales of an already existing product (para. 13).