If a company uses the net realizable value method and has further processing costs that are equal percentages of the final sales value for all the joint products, then the gross margin as a percent of sales will be equal for all the joint products with common joint costs.

Question

Quizplus · Accepted Answer

When further processing costs are equal percentages of the final sales value for all joint products, the allocation of common joint costs using the net realizable value method results in each product having the same gross margin percentage. This is because the method allocates costs in proportion to the net realizable value (sales value minus further processing costs), and if the further processing costs are equal percentages of the sales value, the proportion of costs allocated to each product relative to its sales value will be the same, leading to equal gross margin percentages.

If a Company Uses the Net Realizable Value Method and Has