How Does the Physical-Measure Method Allocate Joint Costs

question 11

Multiple Choice

How does the physical-measure method allocate joint costs?

• A) allocates joint costs to joint products in a way that each product has an identical gross-margin percentage
• B) allocates joint costs to joint products on the basis of a comparable physical measure at the split-off point
• C) allocates joint costs to joint products on the basis of the relative sales value at the split-off point
• D) allocates joint costs to joint products on the basis of relative NRV

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Definitions:

Fair Value

An estimate of the market value of an asset or liability, based on current prices in an active market or valuation models, indicating what a willing buyer and seller would agree to exchange it for.

Accrued Interest

Interest that has accumulated over a period of time but has not yet been paid or charged.

Semiannual Interest

Interest that is paid or calculated twice a year on a loan or investment.

Available-for-sale Securities

Available-for-sale securities are financial assets that are neither classified as held-to-maturity securities nor trading securities, and are recorded at fair market value on the balance sheet.