How to Allocate Joint Costs using the Constant Gross Margin Net Realizable Value Method

This video shows how to allocate joint costs to joint products by using the Constant Gross Margin Net Realizable Value Method. This method is useful when you do not know the estimated sales value of one of the joint products at the splitoff point. This method is unique in that it may actually result in a negative cost allocation for one of the joint products. One drawback to the Constant Gross Margin Net Realizable Value Method is that it assumes all products have the same ratio of cost to selling price, which is unlikely to be the case in a real-world setting.

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