An accountant allocate joint cost to properly cost of product & by products
The reasons for allocating joint cost include:-
01.To evaluate inventories and computes cost of goods sold for both external financial and tax reporting.
02.TO value inventory for insurance purposes.
03.TO value inventory and computes cost of goods sold for internal financial reporting.
04.To determine cost of reimbursement under contracts where companies sells only a portion of the jointly manufactures products or services or deliver to a single customer.