Joint Cost Allocation (Learning Distinguishing Characteristics.)

Physical Quantity Method

A cost allocation method that uses physical measures such as weight, volume, or quantity of output to divide joint costs among multiple products produced together.

Sales Value at Splitoff Method

This method allocates joint costs based on the relative sales value of each product at the split-off point. It emphasizes the economic value of products to determine cost distribution.

Net realizable Value (NRV) Method

A method for allocating joint costs based on the estimated net realizable value of each product after the split-off point. This value is calculated by taking the final sales value of the product and subtracting any additional costs required to make the product saleable.

Constant Gross Margin percentage NRV Method:

A joint cost allocation method that ensures each product retains a consistent gross margin percentage based on its net realizable value. This method adjusts the allocated costs to maintain a predetermined gross margin across all products derived from joint production.

Physical Quantity Method

	Price per pound	Production (Pounds)	Sales (Pounds)	Beginning Inventory
Pork Chops	4	30	20	0
Ham	3	50	30	0
Bacon	1.2	120	100	0
	Price per pound	Production (Pounds)					Production (Pounds)	Allocated Joint Costs	Sales (Pounds)		Price per pound	Sales Revenue		Sales (Pounds)		Allocated Joint Costs		Production (Pounds)	Cost of goods sold		Sales Revenue		Cost of goods sold	Gross Margin
Pork Chops	4	30	/	200	0.15	+	30	45	20	*	4	80	|	20	*	45	/	30	30	|	80	-	30	50
Ham	3	50	/	200	0.25	+	50	75	30	*	3	90	|	30	*	75	/	50	45	|	90	-	45	45
Bacon	1.2	120	/	200	0.6	+	120	180	100	*	1.2	120	|	100	*	180	/	120	150	|	120	-	150	-30
		200

What cost allocation method is this?

Sales Value at Splitoff Method

	Price per pound	Production (Pounds)	Sales (Pounds)	Beginning Inventory
Pork Chops	4	30	20	0
Ham	3	50	30	0
Bacon	1.2	120	100	0
	Price per pound		Production (Pounds)	Sales value at splitoff						Allocated Joint Costs		Sales (Pounds)		Allocated Joint Costs		Production (Pounds)	Cost of goods sold		Sales Revenue		Cost of goods sold	Gross Margin
Pork Chops	4	*	30	120	/	414	29%	*	414	87	|	20	*	87	/	30	58	|	80	-	58	22
Ham	3	*	50	150	/	414	36.20%	*	414	109	|	30	*	109	/	50	65	|	90	-	65	25
Bacon	1.2	*	120	144	/	414	34.80%	*	414	104	|	100	*	104	/	120	87	|	120	-	87	33
				414

What Cost Allocation Method is this?

Net realizable Value (NRV) Method

	Final Price per Pound		Production (Pounds)	Final Sales Value of Production		Separable costs							Allocated Joint Costs		Sales (Pounds)		Final Price per Pound	Sales Revenue		Sales (Pounds)		Allocated Joint Costs		Final Sales Value of Production		Production (Pounds)	Cost of goods sold		Sales Revenue		Cost of goods sold	Gross Margin
Smoked Chops	4.5	*	30	135	-	9	126	/	442	28.5%	*	300	85	|	20	*	4.5	90	|	20	*	85	+	135	/	30	63	|	90	-	63	27
Smoked Ham	3.5	*	50	195	-	15	150	/	442	36.2%	*	300	109	|	30	*	3.5	105	|	30	*	109	+	195	/	50	74	|	105	-	74	31
Smoked Bacon	1.6	*	120	192	-	36	156	/	442	35.3%	*	300	106	|	100	*	1.6	160	|	100	*	106	+	192	/	120	118	|	160	-	118	42
			502-			60	442						300

What Cost Allocation method is this?

Constant Gross Margin percentage NRV Method

	Final Price per Pound		Production (Pounds)	Final Sales Value of Production	Separable costs	Final Sales Value of Production						Allocated Joint Costs	Sales (Pounds)		Final Price per Pound	Sales Revenue			Cost of goods sold	Gross Margin
Smoked Chops	4.5	*	30	135	9	135	*	(1-28.3%)	96.795	-	9	88	20	*	4.5	90	*	(1-28.3%)	64.5	25.5
Smoked Ham	3.5	*	50	175	15	175	*	(1-28.3%)	125.475	-	15	110	30	*	3.5	105	*	(1-28.3%)	75.3	29.7
Smoked Bacon	1.6	*	120	192	36	192	*	(1-28.3%)	137.664	-	36	102	100	*	1.6	160	*	(1-28.3%)	114.7	45.3

What Cost Allocation method is this?

Physical Quantity Method

Production+(Production/Total Production)= Allocated Joint Costs

Which Cost Allocation Method is this?

Sales Value at Splitoff

Price per Pound*Production=Sales Value

Sales value/Total Sales values= Sales%

Sales%*Total Joint Cost= Allocated Joint Costs

Which Cost Allocation Method is this?

Net realizable Value (NRV) Method

((Final sales value of production-Separable costs)/Total of all sales value of production)-separable costs= Percentage.

Percentage*Total Allocated Joint costs= Allocated Joint Costs

Which Cost Allocation Method is this?

Constant Gross Margin percentage NRV Method

Total Final Sales value of production-Total separable costs-Total production=Gross Margin Percentage.


Final Sales value of production*(1-Gross Margin Percentage)-Separable costs= Allocated Joint costs

Which Cost Allocation Method is this?