Which of the following best describes how the constant gross-margin percentage NRV method allocates joint costs?
A) a gross margin is calculated and for each product and then the gross margin is deducted along with separable costs from the final sales value of a product to derive the joint cost allocation for a product
B) an overall gross margin is calculated and for each product and then the gross margin is deducted along with separable costs from the final sales value of a all the products produced in the joint processing and the allocations are then made based on physical volume measures
C) an overall gross margin is calculated and for each product the gross margin is deducted along with separable costs from the final sales value of a product to derive the joint cost allocation for the product
D) a gross margin is calculated and for each product and then gross margin is deducted along from the final sales value of a product to derive the joint cost allocation for a product.

Question

Quizplus · Accepted Answer

The constant gross-margin percentage NRV method calculates an overall gross margin for all joint products and then deducts the individual product's gross margin and separable costs from the final sales value of that product to derive the joint cost allocation for that product. Therefore, option C best describes how the method allocates joint costs. Option A is incorrect because it implies that each product has a different gross margin, which is not the case under the constant gross-margin percentage NRV method. Option B is incorrect because it mentions physical volume measures, which are not used in this method. Option D is incorrect because it does not account for an overall gross margin calculation.

Which of the Following Best Describes How the Constant Gross-Margin