Which of the following joint cost allocation methods recognizes that costs incurred after the split-off point are part of the cost total on which profit is expected to be earned?
A)The sales-value-at-split-off method
B)The constant gross margin percentage method
C)The physical units method
D)The relative market value method

Question

Quizplus · Accepted Answer

The constant gross margin percentage method recognizes that costs incurred after the split-off point are part of the cost total on which profit is expected to be earned, as the joint costs are allocated based on the expected contribution margin. This method is commonly used in industries where products' values differ significantly after the split-off point, like the processing of raw materials into finished goods. The other methods, such as the sales-value-at-split-off method, physical units method, and relative market value method, are not specifically designed to account for post-split-off costs.

Which of the Following Joint Cost Allocation Methods Recognizes That