The Constant Gross-Margin Percentage NRV Method of Joint Cost Allocation

question 45

Multiple Choice

The constant gross-margin percentage NRV method of joint cost allocation ________.

• A) involves allocating costs in such a way that maintaining the same gross margin percentage for each product that was obtained in prior years
• B) computes gross margin before allocating the costs to the products
• C) is the same as the estimated NRV method
• D) is the same as the sales-value at split-off method

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Definitions:

Variable Manufacturing Overhead

Refers to the production costs that change in proportion to the amount of production output, excluding direct materials and direct labor costs.

Direct Labor-Hours

The total hours worked directly on the manufacture of products, used for assigning labor costs to units of production.

Materials Price Variance

The difference between the actual cost of materials purchased and the expected cost, often used to monitor and control production costs.

Direct Labor-Hours

The total hours of labor directly involved in the production of goods or services, often used as a basis for allocating labor costs to products.