Abstract This article focuses on joint cost analysis as an aid to management. In this particular instance the joint costs of production are allocated between the joint products according to the value method. In the short run certain expenditures management, buildings and machine, etc. are fixed--their incurrence is compulsory whether or not economic activity is undertaken. On the other hand, there are some expenditures which, in the same period are variable with output. The inclusion of a proportion of fixed or overhead expenditures in short term cost calculations is merely an attempt to bring the long term into the short. The expediency of transferring resources from less to more profitable lines of economic activity is unquestionable. The difficulty which arises in this particular case is of deciding which is more profitable. This approach would indicate the more profitable of the two alternatives, but even though the purchase of the machine may appear more economic, a further consideration remains, namely, whether the resources released by discontinuing the special processing of product are sufficiently great to proceed with the planned scale of investment.
G. H. Lawson (Sun,) studied this question.