Split-off point
In one sentenceThe stage in joint production at which the joint products separate and each becomes an independent product that can be sold or processed further.
Simply put
Before the split-off point all costs are joint, and after it each product has its own costs.
When deciding “sell now or process further?”, the joint cost does not count, because it is incurred either way. Compare only the additional revenue with the additional processing cost.
Worked example
An oil factory can sell a product at the split-off point for 70,000 SAR, or refine it at a cost of 15,000 SAR and sell it for 90,000 SAR.
Additional revenue from refining90,000 − 70,000 = 20,000 SAR
Additional refining cost15,000 SAR
Joint cost before split-offDoes not enter the decision
Additional profit from further processing20,000 − 15,000 = 5,000 SAR