Which of the following statements describing the alternative methods of joint co

Question

Which of the following statements describing the alternative methods of joint cost allocation is FALSE?

a) Under the physical-measure method, a greater amount of joint costs will be allocated to the high-volume product than to the low-volume product.

b) The constant gross margin percentage method will allocate joint costs, such that each product claims the same level of contribution to the company's profit after joint cost allocation.

c) The sales value at split-off method can be used even when the further processing costs of a product are unknown.

d) Uner the net realizable value method, the gross margin as a % of total revenue will be identical for all joint products.

Explanation / Answer

Answer is D. Under net realizable value method, the gross margin as a % of total revenue will be identical for all joint products.

Explanation:

Under net realizable method, the joint cost is apportioned in the ratio of the net of sales value after splitt off point after deducting the further processing cost. Therefore, the Gross margin ratio in this method will not be same for all the products.

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