A joint cost of producing two products can be allocated between those products on the basis of the relative physical quantities of each product produced.

Question

Quizplus · Accepted Answer

This method of cost allocation is known as the physical quantity method or the physical output method. It is based on the assumption that joint costs are caused by the physical quantities of each product produced. Therefore, allocating the costs based on the relative physical quantities of each product is the most appropriate method.

A Joint Cost of Producing Two Products Can Be Allocated