Physical Unit method:

The Physical Unit method of allocation joint costing is used for separable products and cost is based on the weight allocated to each portion of the production. The formula for the Physical Unit method is as follows:

For explaining this method we have many examples but the example which I am going to give there that is from the Oil sector. The Oil rigging is a process to produce the oil which a natural resource but during the producing process there are many other by products which we abstract from this process the oil companies use the same resources but with the different production costs which are actually joint costs with each other. That example helps us to understand these methods.

“Gleim’s book 15^th edition for the CMA-USA students and Professionals is the source of all the examples and this topic”

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