The physical-measure method of allocating joint costs has several disadvantages:

1. Lack of Relevance: This method allocates costs based on physical measures like weight, volume, or time. However, these physical measures may not always be relevant or reflect the economic benefits received from the joint products.

2. Inaccuracy: The physical measure may not accurately represent the effort or resources consumed in the production process. For example, one product may require more expensive materials or more complex processes, but if it weighs less, it would be allocated less cost.

3. Ignores Market Value: This method ignores the market value of the products. Two products could have the same weight, but vastly different market values. However, this method would allocate the same costs to both.

4. Not Suitable for All Industries: This method is not suitable for all industries. For example, in industries where products are intangible (like services), this method cannot be used.

5. Encourages Overproduction: Since costs are allocated based on physical measures, it might encourage overproduction of those products that have higher physical measures but lower market values.

Question

The physical-measure method of allocating joint costs has several disadvantages:

1. Lack of Relevance: This method allocates costs based on physical measures like weight, volume, or time. However, these physical measures may not always be relevant or reflect the economic benefits received from the joint products.

2. Inaccuracy: The physical measure may not accurately represent the effort or resources consumed in the production process. For example, one product may require more expensive materials or more complex processes, but if it weighs less, it would be allocated less cost.

3. Ignores Market Value: This method ignores the market value of the products. Two products could have the same weight, but vastly different market values. However, this method would allocate the same costs to both.

4. Not Suitable for All Industries: This method is not suitable for all industries. For example, in industries where products are intangible (like services), this method cannot be used.

5. Encourages Overproduction: Since costs are allocated based on physical measures, it might encourage overproduction of those products that have higher physical measures but lower market values.

Knowee AI · Accepted Answer

The physical-measure method of allocating joint costs has several disadvantages:

1. Lack of Relevance: This method allocates costs based on physical measures like weight, volume, or time. However, these physical measures may not always be relevant or reflect the economic benefits received from the joint products.

2. Inaccuracy: The physical measure may not accurately represent the effort or resources consumed in the production process. For example, one product may require more expensive materials or more complex processes, but if it weighs less, it would be allocated less cost.

3. Ignores Market Value: This method ignores the market value of the products. Two products could have the same weight, but vastly different market values. However, this method would allocate the same costs to both.

4. Not Suitable for All Industries: This method is not suitable for all industries. For example, in industries where products are intangible (like services), this method cannot be used.

5. Encourages Overproduction: Since costs are allocated based on physical measures, it might encourage overproduction of those products that have higher physical measures but lower market values.

DISADVANTAGE of the physical-measure method of allocating jointcosts?

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