A Business Which Enters into a Contract to Purchase a Product

question 192

Multiple Choice

A business which enters into a contract to purchase a product (or products) and will compensate the manufacturer under a cost reimbursement formula, should take an active part in the determination of how joint costs are allocated because

• A)it is important in the understanding of the cause-and-effect relationship.
• B)if the manufacturer successfully allocates a large portion of its costs to these products then it will be able to sell its other nonreimbursed products at lower prices.
• C)the ASPE/IFRS requires the business to participate in the cost allocation process.
• D)they are used in the calculation of the suppliers inventoriable costs.
• E)sales discounts often depend on joint cost allocation amounts.

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