In a joint production process, the allocation of joint (common) costs to each of the joint products being produced is needed principally:
A) To meet external reporting requirements (i.e., for financial statement preparation purposes).
B) To determine whether the firm in question should produce at all.
C) To assess supplier performance.
D) To determine which products, if any, should be processed beyond the split-off point.
E) For determining the incremental revenues associated with additional processing of each product.

Question

Quizplus · Accepted Answer

Joint costs must be allocated to individual joint products in order to accurately report financial information, especially for external reporting purposes. The allocation process enables firms to properly determine the costs associated with each product and to ensure that financial statements accurately reflect the value of their inventory and cost of goods sold.

In a Joint Production Process, the Allocation of Joint (Common)