The drawback of the constant gross-margin percentage NRV method in joint costing is that ________.
A) it recognizes that profits are derived from the costs incurred after splitoff
B) it assumes the profit margin to be identical across all products
C) it attempts to approximate the sales values at splitoff by subtracting from final selling prices the separable costs incurred after the splitoff point
D) it 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. This approach could result in incorrect cost allocations to each product, and thus it is a drawback of this method. The other options do not correctly describe the drawback of this method.

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