Question

Which of the following is NOT a strategy for costing inventory when joint-cost circumstances are involved?

a. Use the estimated net realizable value.
b. Allocate costs according to the amount in the respective cost pools.
c. Allocate costs according to the market selling price.
d. Allocate costs based on constant gross margin.
e. Allocate costs according to a predetermined physical measure.

Answer 1

The correct answer is c. Allocate costs according to the market selling price. When joint-cost circumstances are involved, various strategies can be used to cost inventory, but allocating costs according to the market selling price is not one of them.

Step-by-step explanation:

The correct answer is c. Allocate costs according to the market selling price.

When joint-cost circumstances are involved, various strategies can be used to cost inventory. These include:

1. Use the estimated net realizable value
2. Allocate costs according to the amount in the respective cost pools
3. Allocate costs based on constant gross margin
4. Allocate costs according to a predetermined physical measure

However, allocating costs according to the market selling price is not a strategy for costing inventory when joint-cost circumstances are involved.