Which of the following statements is true of the methods for allocating joint costs?
A) Under the cause-and-effect criterion, the physical-measure method is highly desirable.
B) Byproducts are never excluded from the denominator used in the physical-measure method.
C) The NRV method is never used when the selling prices of joint products vary frequently.
D) The sales value at split-off method follows the benefits-received criterion of cost allocation.

Question

Quizplus · Accepted Answer

The sales value at split-off method follows the benefits-received criterion of cost allocation, as it allocates joint costs based on the relative sales values of the individual products at the split-off point. The cause-and-effect criterion would not necessarily make the physical-measure method highly desirable, as other allocation methods (such as the sales value at split-off method) may be more appropriate depending on the circumstances. Byproducts are sometimes excluded from the denominator used in the physical-measure method, depending on the circumstances. The NRV method may be used when selling prices of joint products vary frequently, but it is not always the best choice.

Which of the Following Statements Is True of the Methods