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CA Intermediate · Cost and Management Accounting · Joint Products and By Products

Under the constant gross margin percentage method of apportioning joint costs, the joint cost is allocated so that:

Under the constant gross margin percentage method, joint costs are apportioned so that every product earns the same overall gross profit percentage. The overall margin is computed on total final sales value, and each product's joint cost is the balancing figure after deducting margin and further costs.

  1. Aeach product has the same cost per unit
  2. Beach product earns the same overall gross profit percentageCorrect
  3. Ceach product has the same sales value at split-off
  4. Deach product bears the same share of further processing cost

Explanation

The constant gross margin percentage method first computes the overall gross margin on the final sales value of all joint products. Joint cost is then apportioned so each product shows the same gross margin percentage. Equal cost per unit relates to the physical units method.

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