The Midwest Circulatory Diseases Society placed an advertisement in prominent publications in the region. The advertisement provided information about symptoms of the diseases and offered practical advice for controlling their immediate effects. The society's accountants estimate that about 75 percent of the advertising copy was devoted to information about the disease and the remainder was an appeal for funds. The advertisement cost $20,000. Using the physical units method of separating joint costs, how much of the cost of the advertisement should be reported as program costs?

Question

Quizplus · Accepted Answer

The physical units method of separating joint costs allocates the $20,000 based on the proportion of the advertisement devoted to each purpose. Since 75% of the advertisement was about disease information (program costs), 75% of $20,000, which is $15,000, should be reported as program costs.

The Midwest Circulatory Diseases Society Placed an Advertisement in Prominent