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Explain four (4) reasons why a firm would prefer to use sales value at the split-off...

Explain four (4) reasons why a firm would prefer to use sales value at the split-off point

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Expert Solution

The sales-value-at-split-off method allocates the joint cost based on each product’s share of market or sales value at the split-off point.In this method, the number of units produced at the split off point is multiplied with the Selling price of that unit at split off point and the cost is allocated to the products in the so calculated ratio.

Advantages:

  1. Considers current market value of products as basis for allocating joint cost i.e higher the market value of that product, higher apportionment of joint cost to that product due to which it serves as a proxy for relative benefit received by each product from the joint cost
  2. Is easy to calculate
  3. Incorporates the ability to bear concept for fairness.

  4. It measures the value of the joint product immediately at the end of the joint process.

  5. It does not have a need of information on the processing steps after split-off point, if there is further processing.

jeff jeffy answered 1 year ago
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