An example of a market-based approach to allocating joint costs is (are)allocating joint costs based on:
A)sales value at splitoff method
B)physical volume
C)constant gross-margin percentage method
D)Both A and C are correct.

Question

Quizplus · Accepted Answer

Both the sales value at splitoff method and the constant gross-margin percentage method are market-based approaches to allocating joint costs. The sales value at splitoff method allocates joint costs based on the relative sales values of the individual products at the point of splitoff, while the constant gross-margin percentage method allocates joint costs based on each product's expected gross margin percentage. Both methods take into account market conditions and the expected value of the different products when allocating joint costs, making them market-based approaches.

An Example of a Market-Based Approach to Allocating Joint Costs