If two or more products share a common process before they are separated,the joint costs should be assigned in a manner that
A)assigns a proportionate amount of the total cost to each product on a quantitative basis.
B)maximizes total earnings.
C)minimizes variations in unit production costs.
D)does not introduce an element of estimation into the process of accumulating costs for each product.

Question

Quizplus · Accepted Answer

Assigning joint costs in a proportionate manner based on a quantitative basis is the most reasonable and objective method for allocating costs among multiple products. This method ensures that each product bears a justifiable amount of the joint cost relative to its share of production, and avoids introducing subjectivity or arbitrary estimation in the allocation process. Maximizing total earnings or minimizing variations in unit production costs are important goals, but they are not directly relevant to the issue of cost allocation.

If Two or More Products Share a Common Process Before