If two or more products share a common process before they are separated,the joint costs should be allocated in a manner that:
A)Assigns a proportionate amount of the total cost to each product equitably.
B)Maximizes total earnings.
C)Minimizes variations in a unit of production cost.
D)Does not introduce an element of estimation into the process of accumulating costs for each product.

Question

Quizplus · Accepted Answer

Allocating joint costs in a proportionate manner based on each product's relative contribution to the common process is considered the most equitable and fair method. It ensures that each product bears a share of the cost based on its individual contribution to the process. Maximizing earnings, minimizing variations in unit cost, and avoiding estimation are secondary considerations, as the primary goal should be to allocate the costs fairly.

If Two or More Products Share a Common Process Before