Asked by Kaylan Summey on Jul 05, 2024
Verified
For which of the following should joint costs and joint cost allocations not be used?
A) Inventory valuation
B) Comparing profitability of joint products
C) Rewarding managers of processes beyond split-off point
D) Both comparing profitability of joint products AND rewarding managers of processes beyond split-off point
Joint Costs
Costs that are incurred in the process of producing two or more products or services simultaneously and are not readily assignable to individual products.
Inventory Valuation
The method used by businesses to assess the value of their inventory, taking into account the cost of acquiring or producing the goods and any market changes.
Profitability of Joint Products
The assessment of earnings from products that are produced simultaneously from the same process and cannot be distinguished cost-wise until a certain point of production.
- Acquire an understanding of the concept of joint costs and how they impact decisions.
Verified Answer
EO
Ernesto Ordaniel
Jul 09, 2024
Final Answer :
D
Explanation :
Joint costs and joint cost allocations should not be used for comparing profitability of joint products or rewarding managers of processes beyond the split-off point because these costs are sunk and cannot be traced directly to the products or processes beyond the split-off point.
Learning Objectives
- Acquire an understanding of the concept of joint costs and how they impact decisions.