Purchase Solution

Three methods of allocating joint costs

Not what you're looking for?

Ask Custom Question

Describe the three methods used to allocate joint costs. What are the advantages/disadvantages of each allocation method? Which method would you recommend? Why?

Purchase this Solution

Solution Summary

Your discussion is 579 words and a textbook reference and gives the pros and cons of the three methods of allocating joint costs, explains the three methods and suggests a method with a rationale.

Solution Preview

Allocating Joint Costs
Describe the three methods used to allocate joint costs.

The three methods are the (1) physical units at split off, (2) the relative sales value at split off and (3) estimated net realizable value or "NRV" method (final selling price less the cost to process after the split off point).

The physical units method uses the quantity of physical units, such as gallons, to spread the joint costs to all the gallons produced, regardless of their value. This typically would ignore by-products. The relative sales value at split off uses the to sales value at split off to spread the joint costs to all the items at the end of the joint costs, including any sellable by-products. This method would ignore processing after split-off, if any. The NRV method using the final selling price anticipated after processing beyond the split-off point (when joint ...

Solution provided by:
Education
  • BSc, University of Virginia
  • MSc, University of Virginia
  • PhD, Georgia State University
Recent Feedback
  • "hey just wanted to know if you used 0% for the risk free rate and if you didn't if you could adjust it please and thank you "
  • "Thank, this is more clear to me now."
  • "Awesome job! "
  • "ty"
  • "Great Analysis, thank you so much"
Purchase this Solution


Free BrainMass Quizzes
Six Sigma for Process Improvement

A high level understanding of Six Sigma and what it is all about. This just gives you a glimpse of Six Sigma which entails more in-depth knowledge of processes and techniques.

Production and cost theory

Understanding production and cost phenomena will permit firms to make wise decisions concerning output volume.

IPOs

This Quiz is compiled of questions that pertain to IPOs (Initial Public Offerings)

Social Media: Pinterest

This quiz introduces basic concepts of Pinterest social media

Academic Reading and Writing: Critical Thinking

Importance of Critical Thinking