Question

Which of the following would explain why a company might need to follow very stringent rules that specify the way in which joint costs are assigned to products?

A) Cost accounting standards
B) Market competition
C) Tax regulations
D) Customer preferences

Answer 1

A company might need to follow stringent rules for allocating joint costs due to cost accounting standards, market competition, and tax regulations.

Step-by-step explanation:

A company might need to follow stringent rules that specify the way in which joint costs are assigned to products due to cost accounting standards, as these standards help ensure accurate and consistent allocation of costs. These rules provide guidelines on how to allocate joint costs among different products based on factors like relative sales value, physical units produced, or other appropriate criteria.

Market competition is another factor that can influence a company to follow stringent rules for allocating joint costs. In competitive industries, accurate allocation of costs becomes crucial to determine product profitability and make informed pricing decisions.

While tax regulations may influence overall financial reporting and tax calculations, they may not specifically dictate the way joint costs are assigned to products.