1) Physical Measure/Unit
Joint costs are allocated to the joint products according to the ratio of physical measurement of the outputs at the split off point.
2) Constant Gross Margin Rate
This method assumes that each product contributes an equal percentage of gross profit for every shilling of sales. It works back from gross margin to the joint costs allocation. It involves the following steps:
(i) Calculate the overall rate of gross margin for al the products
(ii) Multiply the computed overall rate by the sales of every product to obtain the gross margin of the product.
(iii) Deduct the gross margin from the sales value of the product to determine the total costs for each product.
(iv) Deduct separable costs from the total costs to obtain joint costs allocated.
Wilfykil answered the question on April 17, 2019 at 08:36
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