Allocating Joint Costs
Describe the three methods used to allocate joint costs.
What are the advantages/disadvantages of each allocation method?
Which method would you recommend?
Support your position with evidence from the text or external sources. Your initial post should be 200-250 words.
As you read in Chapter 8, there are arguments (for and against) variable costing and absorption costing. Select one of these costing methods and explore the various arguments. Determine whether you are “for” or “against” this selected method. Provide evidence from the text to support your position. Your initial post should be 200-250 words.
Your second discussion question is based on variable and absorption costing also in chapter eight. Schneider (2012), explain variable and absorption costing methods as:
Variable costing (also known as direct costing) is an approach to product costing that assigns only variable manufacturing costs (direct materials, direct labor, and variable factory overhead) to items produced. Thus, inventoriable costs are limited to the variable manufacturing costs, and period costs include all fixed costs and variable nonmanufacturing costs. Absorption costing (also known as full costing), the method typically used for external income statement reporting, allocates all manufacturing costs (variable and fixed) to products. (8.2 Variable Costing, para. 1)
The author then provides examples comparing the two methods and providing arguments of using either method such as short term versus long term, unethical behaviors and external versus internal reporting. Remember these points as you prepare your responses to your second discussion question.
Schneider, A. (2012). Managerial Accounting: Decision making for the service and manufacturing sectors. San Diego, CA: Bridgepoint Education