Yes, that should joint costs be
allocated among joint products.
There are some reasons that require joint costs to be allocated:
1.
To
reimburse cost incurred under contracts for companies that have few of their
services or products reimbursed under cost-plus contracts with government
agency for example.
2.
To
compute and calculate inventorial costs and cost of goods sold for internal
reporting purposes. These reports affect evaluation of division managers’
performance and thus are used in division profitability analysis.
3.
Also
inventorial costs and cost of goods sold are used for financial accounting
purposes and reporting purposes for income tax authorities.
4.
To
regulate rates for one or more of the jointly produced products or services
that is subject to price regulation.
5.
As
a basis for settlement insurance claims such as damage claims made on the basis
of cost information by businesses having joint products, main products, or
byproducts.
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