How does the physical-measure method allocate joint costs?
A) allocates joint costs to joint products in a way that each product has an identical gross-margin percentage
B) allocates joint costs to joint products on the basis of a comparable physical measure at the split-off point
C) allocates joint costs to joint products on the basis of the relative sales value at the split-off point
D) allocates joint costs to joint products on the basis of relative NRV

Question

Quizplus · Accepted Answer

The physical-measure method of allocating joint costs allocates joint costs to joint products on the basis of a comparable physical measure at the split-off point. This method is suitable for industries where the output products have different sales values but can be measured in a similar physical measure, such as pounds, gallons or tons. It is a practical and objective method that is easy to use and understand. Therefore, Option B is the correct answer. Option A, C, and D are incorrect because they describe different methods of allocating joint costs.

How Does the Physical-Measure Method Allocate Joint Costs