Which Joint Cost Allocation Methods Are Preferred Because They Are

question 98

Multiple Choice

Which joint cost allocation methods are preferred because they are based on a product's ability to pay for its allocated cost?
I. Constant gross margin NRV
II. Physical output
III. Net realizable value

• A) I and II only
• B) I and III only
• C) II and III only
• D) III only

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Definitions:

Accounting Break-Even

The point at which an organization's revenues exactly cover its expenses, excluding interest and taxes, resulting in neither profit nor loss.

Straight-Line Depreciation

This method of depreciation spreads the cost evenly across the useful life of a fixed asset, resulting in consistent annual charges.

Variable Cost

Financial charges that are tied to the extent of production levels.

IRR

Internal Rate of Return; a financial metric used to estimate the profitability of potential investments.