Allocating Joint Costs to Products Using a Value Basis Method

question 175

Multiple Choice

Allocating joint costs to products using a value basis method is based on their relative:

• A) Direct costs.
• B) Variable costs.
• C) Total costs.
• D) Sales values.
• E) Gross margins.

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Definitions:

Accumulated Depreciation

The cumulative total of the depreciation expense allocated for a physical asset from the time it was first utilized.

Equipment

Equipment consists of the tools, machinery, and other tangible assets used by a company in its operations.

Asset-Expense Relationship

The association between expenses incurred by a business and the assets used to generate revenue.

Prepaid Expense

An expense that has been paid in advance and is recognized as an asset until the service or good is consumed or used in the future.