Which of the Following Reasons Explain Why a Physical-Measure to Allocate

question 122

Multiple Choice

Which of the following reasons explain why a physical-measure to allocate joint costs is less preferred than the sales value at split-off point?

• A) a physical measure such as volume is difficult to estimate than sales value
• B) physical volume usually has little relationship to the revenue producing power of products
• C) a physical measure usually results in less costs being allocated to the product that weighs the most
• D) customers will easily understand that the products are overpriced

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Definitions:

Selling

The process of persuading someone to buy a product or service.

Administrative Expense

Costs related to the general operation of a company that are not directly tied to a specific business activity, such as salaries of executive personnel, office supplies, and utilities.

Direct Materials

Raw materials that are directly incorporated into a finished product and can be directly attributed to the product manufacturing process.

Factory Building

A type of commercial real estate designed for manufacturing processes, assembly, and storing materials and goods used and produced by industrial and manufacturing operations.