The main purpose of allocating joint costs to products is to
A)assist management in setting prices for its products.
B)assist in the annual budgetary processes.
C)assist in determining the cost of the products involved.
D)assist in determining which products should be added or dropped.

Question

Quizplus · Accepted Answer

Allocating joint costs to products helps in determining the cost of the individual products involved. Joint costs are costs incurred in the production process that cannot be specifically attributed to one product but have to be allocated among the products produced. This helps in determining the actual cost of production of each product, which is essential for pricing decisions and profitability analysis. Joint cost allocation does not directly aid in budgetary processes or in deciding which products to add or drop from the product line.

The Main Purpose of Allocating Joint Costs to Products Is