ExpertMedium2 marksMultiple Choice
ACCA · Question 15 · Cost accounting techniques
Section A
DairyCorp processes raw milk into two joint products: Cream and Skimmed Milk. The joint processing costs up to the split-off point must be apportioned between the two products.
Which of the following is a widely accepted method for apportioning these joint costs?
Section A
DairyCorp processes raw milk into two joint products: Cream and Skimmed Milk. The joint processing costs up to the split-off point must be apportioned between the two products.
Which of the following is a widely accepted method for apportioning these joint costs?
Answer options:
A.
Apportioning based on the relative sales value of the products at the split-off point.
B.
Charging all joint costs to the product with the highest physical volume.
C.
Apportioning based on the post-split-off further processing costs.
D.
Treating all joint costs as fixed overheads and not apportioning them.
How to approach this question
Recall the standard methods for joint cost apportionment: physical units, sales value at split-off, and net realizable value.
Full Answer
A.Apportioning based on the relative sales value of the products at the split-off point.✓ Correct
Joint costs are incurred before the split-off point where products become separately identifiable. Common methods for apportioning joint costs include physical measurement (e.g., liters, kg) and market value methods (sales value at split-off or Net Realizable Value). Apportioning based on sales value at split-off is widely used as it aligns cost allocation with the economic value of the products.
Common mistakes
Confusing joint products with by-products (where by-product revenue is usually deducted from joint costs).
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