The drawback of the constant gross-margin percentage NRV method in joint costing is that it ________.
A) recognizes that profits are derived from the costs incurred after split-off
B) assumes the profit margin to be identical across all products
C) attempts to approximate the sales values at split-off by subtracting from final selling prices the separable costs incurred after the split-off point
D) ignores the separable costs of further processing

Question

Quizplus · Accepted Answer

The constant gross-margin percentage NRV method assumes that the profit margin is identical across all products, which may not be true in reality as different products may have different demand, competition, and production costs. This can lead to inaccurate allocation of joint costs and over- or under-costing of products.

The Drawback of the Constant Gross-Margin Percentage NRV Method in Joint