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See Also: Joint Costs DefinitionIn accounting, a joint cost is a cost incurred in a joint process. Joint costs may include direct material, direct labor, and overhead costs incurred during a joint production process. A joint process is a production process in which one input yields multiple outputs. It is a process in which seeking to create one type of output product automatically also creates other types of output product. Joint Process ExamplesJoint processes are production processes in which the creation of one product also creates other products. It is a process in which one input yields multiple outputs. Joint production processes are common in the agriculture industry, the food manufacturing industry, and the chemical industry. Joint Cost AllocationAllocate joint costs to the primary output products of the joint process, not the incidental byproducts or scrap. Allocate them using a physical measure or a
monetary measure.
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owner operating at a successful $10 million in revenue, they often mention, “My CPA”… I immediately know that CEO/Entrepreneur is referring to their Tax CPA. That is because one thing that all Entrepreneurs have in common is that they must file a tax return. So, from Read More » September 24, 2021 See also:Quick Ratio AnalysisPrice to Book Value AnalysisPrice Earnings Growth Ratio AnalysisTime Interest Earned Ratio Analysis Use of Financial Ratios Financial Ratios are used to measure financial performance against standards. Analysts compare financial ratios to industry averages (benchmarking), industry standards or rules of thumbs
and against internal trends (trends analysis). The most useful comparison when Read More » CPA’s are SpecializedJune 8, 2021 The Difference in CPAs Looking back at my career I don’t know how many times I have introduced myself to someone and they ask, “Are you a CPA?” and I say yes. Then they tell me “you must be very busy with tax season” and I look at them with a bit of awe and Read More »
JOIN OUR NEXT SERIES Financial Leadership Workshop THE ART OF THE CFO® Financial Leadership Workshop How does the physical measure method allocate joint costs?The physical measure allocates joint costs to primary products based on a physical characteristic, such as units produced, or pounds or tons produced, barrels produced, or some other physical measure that is appropriate for the volume of output of the primary products.
What are the methods that allocating joint cost?Three methods of allocating joint product costs are the physical units method, the market value method, and the net realizable method. The constant gross margin percentage method is also used to allocate joint cost.
What is an example of cost allocation?Cost allocation is the distribution of one cost across multiple entities, business units, or cost centers. An example is when health insurance premiums are paid by the main corporate office but allocated to different branches or departments.
Which of the following is a commonly used joint cost allocation method?Two methods are commonly used to allocate these joint costs to the joint products: the physical quantities method and the sales value method.
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