Question

Which of the following best describes how the constant gross-margin percentage method allocates joint costs?

a) A gross margin is calculated for each product, and then the gross margin is deducted along with separable costs from the final sales value of a product to derive the joint cost allocation for a product.

b) A gross margin is calculated for each product, and then the gross margin is deducted along with separable costs from the final sales value of a product to derive the joint cost allocation for a product.

c) An overall gross margin is calculated for each product, and then the gross margin is deducted along with separable costs from the final sales value of all the products produced in the joint processing, and the allocations are then made based on physical volume measures.

d) An overall gross margin is calculated for each product, and then the gross margin is deducted along with separable costs from the final sales value of a...

Answer 1

The constant gross-margin percentage method allocates joint costs by deducting the gross margin and separable costs from the final sales value of a product.

Step-by-step explanation:

The constant gross-margin percentage method allocates joint costs by calculating a gross margin for each product and deducting it, along with separable costs, from the final sales value of the product. The remaining amount after deductions represents the joint cost allocation for that product. This method bases the allocation on the gross margin and sales value of each product, rather than on physical volume measures.