The Accounting Review Vol. 50 No. 4 1975
Another Approach to Allocating Joint Costs.
Abstract
The article proposes a new computational procedure for allocating joint costs. This article assumes that accountants will continue to be required to allocate costs for reporting purposes. The argument for the acceptance of the proposed procedure is justified only to the extent that the results of this procedure do not possess the disadvantages of the allocation techniques employed in current practice. To an individual firm, all products and services obtained through the incurrence of a joint cost can also be obtained by incurring a separable cost. In the U.S. economy it is possible to contract for virtually any individual service desired, however, to do so may be quite expensive. This expense leads management to incur joint costs in order to effect cost savings. Given the observation that joint costs are incurred to effect cost savings, a different view of joint costs becomes obvious. Rather than allocate costs directly to a cost object, it should be possible to allocate cost savings as an offset to the cost of obtaining services independently.
- DOI
- 10.2308/tar-4491990
- Volume
- 50
- Issue
- 4
- Pages
- 791-795
- Language
- en
- Sources
- openalex crossref