The benefits-received criteria for allocating joint costs indicate market-based measures are preferred because:
A)physical measures such as volume are a clearer basis for allocating cost than other measures
B)other measures are more difficult to calculate
C)revenues are usually the best indicator of the benefits received
D)None of these answers is correct.

Question

Quizplus · Accepted Answer

The benefits-received criteria indicate that costs should be allocated based on the benefits received by each product or department. Revenues are often seen as the best indicator of the benefits received because they directly reflect the value that customers are willing to pay for each product or service. Physical measures such as volume may not always accurately reflect the benefits received, and other measures may be more difficult to calculate or may not provide a clear basis for allocation. Therefore, market-based measures such as revenues are preferred in allocating joint costs.

The Benefits-Received Criteria for Allocating Joint Costs Indicate Market-Based Measures