When indirect costs are a high percentage of total costs

When different products use the different activities of the department in the same proportions

When each department within the company has a single activity

When batch level and product sustaining costs are immaterial

Separable costs after the split off point

The company president's salary

Join costs to the split off point

Purchase costs of the materials required for the joint product

Warranty costs

Lost customers

Liability claims

Tooling changes

Places minimal emphasis on the cost of materials used in manufacturing a product.

Places heavy emphasis on direct costs and disregards consideration of indirect costs.

Could be used when the customer furnishes the material used in manufacturing a product.

Places heavy emphasis on indirect costs and disregards consideration of direct costs.

A

Neither

Both

B

Indirect method

Step down method

Direct method

Step up method