One method of treating by-products is to:

Question

Quizplus · Accepted Answer

Allocating all joint costs to both products and by-products (option B) is not an effective method as it does not reflect the true cost and value of the by-product. Treating the by-product in the same way as the main products (option A) may not be feasible as the by-product may have different properties or uses. Adjusting the cost of the joint products by subtracting the cost of the by-product from the joint costs (option D) does not take into account the revenue potential of the by-product. Hence, the best method is to adjust the cost of the joint products by subtracting the net realisable value of the by-product from the joint costs, as this reflects the true value of the by-product and allows for more accurate cost allocation.

One Method of Treating By-Products Is To