Which joint cost allocation method is described by the following statement? Overall sales revenue minus overall costs (joint plus further processing costs) is calculated to yield gross profit and the gross profit percentage. Each product is then assigned the same cost of goods sold percentage.
A)constant gross margin method
B)weighted average method
C)sales-value-at-split-off method
D)net realizable method

Question

Quizplus · Accepted Answer

The constant gross margin method calculates each product's cost of goods sold as a percentage of its revenue based on a consistent gross margin percentage. This is achieved by subtracting the joint costs and further processing costs from overall sales revenue to calculate a gross profit, which is then used to determine the gross profit percentage. Each product is then assigned the same cost of goods sold percentage based on this percentage.

Which Joint Cost Allocation Method Is Described by the Following