Inaccurate allocation of joint costs to the individual products could cause an unprofitable product to appear to be profitable.

Question

Quizplus · Accepted Answer

Joint costs are common costs that are derived from a single production process that creates multiple products simultaneously. If these costs are inaccurately allocated to individual products, it can lead to misleading information about the profitability of each product. An unprofitable product may appear to be profitable if too much of the joint cost is allocated to more profitable products. This can have serious implications for decision-making such as whether to continue producing the unprofitable product or not.

Inaccurate Allocation of Joint Costs to the Individual Products Could